Early guidance on the operation of the Debt Arrangement Scheme in Scotland stated that deductions under a DAS mandate could also be taken from an employee's Working Tax Credit payments. This was on the basis that it was the employee, through the mandate, who was instructing the employer to pay the tax credit elsewhere.

An article in the latest issue of Advice Online, the weekly newsletter of the Institute of Payroll and Pensions Management, gives recent guidance from the Inland Revenue on this matter. It says:

"We have now had confirmation from the Revenue that their original instructions on the treatment of Working Tax Credit in respect of a Debt Arrangement Scheme were wrong. They have this week issued the following statement, which will be confirmed in the Employer Bulletin in February. We felt it was important to confirm this immediately as the new scheme comes into effect next Tuesday (30th November) and as we go to press official guidance has still not been produced by the Scottish Executive.

'Tax credits cannot under any circumstances be assigned. So employees may not assign any part of their Working Tax Credit to repay a debt under the new Scottish DAS.

If an employee instructs you to deduct an amount from his net pay under the DAS, you must deduct the specified sum from the employee's net earnings only and not from any Working Tax Credit that you may be paying him through the payroll. Always pay the full amount of Working Tax Credit we have told you to pay.

The Scottish Executive is amending its guidance to Money Advisers to make clear that, in calculating surplus income and the amount to be the subject of a payment mandate, Working Tax Credit must not be included.'"

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...back to 26 November 2004

Sources:
www.ippm.org/index.asp?s=membership&p=adviceonline