The latest issue of the Inland Revenue's Employer's Bulletin makes reference to the guidance available from the Department for Constitutional Affairs (DCA) on the handling of the new Schedule 5 AEOs issued by magistrates' courts under the new fines enforcement arrangements. These new-style AEOs use the same percentage deduction tables as are used for Council Tax orders.

The booklet, available at the address below, contains a number of errors, two of which are particularly serious and relate to the calculation of the deductions. Care must therefore be taken when using the two worked examples on pages 8 and 9.

Page 6 of the booklet correctly explains how "attachable earnings" are determined. In most cases, attachable earnings are the same as the employee's net pay, after deducting tax and NICs. However, in both of the worked examples, the deduction is calculated on the earnings before tax and NICs are deducted. The deduction is therefore considerably overstated.

The second error, in the second worked example, involves how deductions are calculated when a weekly-paid employee receives holiday pay in addition to regular earnings. In the example, the employee receives three weeks' pay and uses the total pay for the three weeks to calculate the percentage deduction. The correct method is to calculate the deduction on each week's pay and then add the results together.

The booklet was published in June 2004 and is being issued by magistrates' courts. We drew the attention of the DCA to the errors in August and suggested that the booklet be withdrawn and corrected. That same booklet is still being issued.

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...back to 4 February 2005

Sources:
www.courtservice.gov.uk/cms/media/attachment_earnings_mags_0604.pdf