Attachment of earnings for council tax

In this article we’ll look at how a Local Authority (LA) can use an Attachment of Earnings order (AEO) to collect council tax arrears and how advisers might be able to assist their clients to challenge this.

Introduction

Once a liability order is made the LA has a number of enforcement options available. As debt advisers will be aware, many LAs will opt to use bailiffs to take control of goods as a first step. However where the council tax payer is employed an AEO might be their preferred option. It’s worth noting that if the LA has already attempted to take control of goods and this has failed the relevant amount to be paid under an AEO will include the bailiff’s fees [Reg 6 CT AE amendment regulations 2004]

An AEO (AEO) is an order instructing an employer to deduct money from a person’s wages to repay a debt. The LA’s power to make an AOE comes from reg 37 of the Council Tax Administration and Enforcement Regulations 1992.

Requirement to provide information

Before they issue the order the LA will usually write to the client to ask for information including:

• Name and address of their employer
• Expected earnings
• Any statutory deductions from pay
• Payroll number
• Details of any existing attachments
• Details of other sources of income such as pensions
• Whether anyone else is jointly liable for the debt

Clients who are sent a written request are required to provide the information within 14 days. Failure to provide the information above without a reasonable excuse is a criminal offence and could lead to a magistrate’s court fine of up to £500 (a level 2 fine).

Once an AEO is in place the client must notify the LA if they change employer. If they don’t, they may be fined [Reg 40 (1)]. If the client fails, without reasonable excuse, to tell the LA about a change of employer, the fine is on level 2. If the client provides false information about a change of employer this could lead to a fine of up to £1,000 (level 3).

Notice that an AEO is about to be made

Many LAs have a policy of sending a letter telling the client they intend to apply for an AOE, and giving them a chance to set up a payment plan instead. The regulations don’t require LAs to give this notice. You should check your LA’s practice. If they don’t do this they should be encouraged to do so as a matter of good practice.

In February 2024 the Government responded to a select Committee report on council tax collection. As part of this response the Government has written to LAs to stress that they have discretion to take a flexible approach to council tax collection and encourage them to offer affordable payment arrangements. The Government also confirms that there is no legal requirement for the council tax bill to be collected within the year it is issued. You can read the full response to the select committee report.

If your client has had a letter explaining the LA’s intention to make an AEO they should contact the LA as soon as possible to offer a payment plan. You might need to ask the LA to pause action for a short period to allow you to work with the client to produce a financial statement and make an affordable and sustainable offer. The LA ought to agree to this. If they refuse to pause action your client can make a complaint and an application for Breathing Space might be necessary to prevent an unaffordable AEO from being imposed.

Your client can make a complaint if the council sends them an AEO when either:

• they haven’t been given a chance to make a payment plan
• they have a payment plan and are following it

If your client gets notice of an intention to make an attachment of earnings and they are concerned that this could impact their job they should contact the LA straight away and explain the situation. Evidence should be provided, such as a term in the client’s employment contract. The LA should be asked to agree to a payment plan instead. If the client’s job is at risk and the council decides to go ahead with the AOE the client can make a complaint.

If the client leaves their job or changes jobs

Once an AEO has been made if the client leaves their job the AEO will be ineffective but it isn’t cancelled. The deduction will start again when the client gets a new job. The client must tell the council in writing within 14 days when they leave or change jobs. If they get a new job, they must also tell them:

• the new employer’s details
• how much they’ll earn at the new job

If they don’t tell the council in time, it’s a criminal offence and they could be fined up to £500.[Reg 42 (1)]

If the client is out of work for a prolonged period they can ask for the attachment of earning order to be cancelled. Any request should be put in writing, and the council will expect an alternative payment plan to be made. If the client is claiming benefits a third party deduction from benefits might be the LA’s next step.

What happens if the employer fails to pay the LA

The client remains liable for payments under an AEO until the employer pays them over to the LA. If the employer fails to pay the money, because, for example, they cease to trade, some local authorities may argue that the client has to make the same payments again, even if these have already been deducted from their wages. If the LA pursues the client in these circumstances, they may wish to complain and report the case to the Local Government and Social Care Ombudsman (LGSCO) in England, or, in Wales, the Public Service Ombudsman.

The amount that will be deducted

There are no ‘protected’ earnings, unlike AEOs for county court judgments or for child maintenance arrears. The rate of deduction is a set percentage depending on how much the client earns. For each deduction made, the employer is also allowed to deduct £1.00 for their administrative costs. There are different rates for monthly, weekly and daily earnings. Note these are different in England and Wales.

England

Deductions from monthly earnings: orders made on or after 1 April 2007 [schedule 4 of the CT(A&E) regs 1992]

Wales

Deductions from monthly earnings — orders made on or after 1 April 2022 [Council Tax (Administration and Enforcement) (Amendment) (Wales) Regulations 2022 (SI 2022/107]

Net earnings

An employer has to deduct a specified percentage of a client’s net earnings. Net earnings are defined as the amount received after deduction of income tax, national insurance, superannuation payments and amounts deducted under a pre-existing council tax AEO, if any. Net wages do not include working tax credit, child tax credit, statutory maternity pay, statutory paternity pay, statutory adoption pay or statutory shared parental pay. [Reg 32]

An employer who does not make the correct deductions under an AEO may be fined. The fine is on level 2.

Will breathing space help?

If an attachment of earning order is not yet in place an application for breathing space can be used to pause the recovery action and give the client time to consider their options. However if the AEO has already been made a breathing space will have no impact on this, the AEO will continue. [Reg 7(13)(b) Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020]

Can the council have more than one attachment?

Since 1 October 1998 only two AEOs for council tax arrears may be in force at a time. A client could still have two AEOs for council tax arrears in addition to other orders, for example for non-payment of child maintenance or county court judgments.

Priority of attachment of earning orders

Council tax AEO should be dealt with one at a time and in the order that they were made. They have priority over attachment of earnings for county court judgments but not over attachments for other priority debts. If an AEO is served on an employee who is already subject to an AEO made by a magistrates court for fines, or child support, the earliest order has priority. The net earnings figure for deductions under a lower priority order, or for a second council tax order, will be the amount left after deductions under the first order have been made.

Case example:

Sol lives in Wales. He has a deduction from earnings order in place for his child maintenance payments and arrears. His net earnings are £2,100 a month. The Child Maintenance Service deducts £740 per month, leaving him with net earnings of £1,260. When a council tax AEO is made Sol’s employer must make a further deduction at the rate of 7% of the balance. He’ll pay £88.20 per month under the council tax AEO.

What can the client do if the attachment is causing hardship

As we have said, there are no protected earnings under the legislation and the repayment rates do not take into account any of the client’s circumstances other than their earnings. The rate is the same for a lone parent with 4 dependent children as it is for a single person with no children. Our evidence shows that unaffordable attachments of earnings orders for council tax are a real problem for significant numbers of our clients.

If the rate of the AEO (or proposed AEO) will cause the client hardship the client should write to the LA providing full details of their family situation and their income and expenditure asking for an alternative payment arrangement. They should provide details of any other priority debts and explain if the AEO would mean that they cannot meet other essential costs such as rent and energy payments. If there is a threat of repossession because of rent or mortgage arrears this should be highlighted. If the LA does not agree to cancel the order the client can make a complaint and if necessary take this to the Ombudsman.

The Ombudsman won’t usually investigate the decision to apply for an AEO but this decision could be challenged if the client can show that it is ‘excessive, disproportionate or unjustified’. Issuing an AEO might be considered to be unjust, excessive or unjustified if the client has kept to a payment arrangement, they have provided evidence that an AEO will put their job at risk or they’ve provided evidence that the level of the deduction under the AEO is unaffordable for them.

In the Ombudsman case of Calderdale Metropolitan Borough Council 8 May 2023, a liability order was made and Mr X made an arrangement to pay £21 per month towards council tax arrears. The plan was agreed and no payments were missed.

In November 2022 Calderdale warned that due to missed payments they would apply for an attachment of earnings. Despite Mr X providing evidence that all payments were made, Calderdale took £167 by attachment in December 2022 and wrote again to say the arrangement had not been maintained. They never acknowledged Mr X’s evidence and were plainly wrong.

Calderdale was ordered to pay £250 for distress. The LGSCO acknowledged the attachment was unaffordable given the income and expenditure used to set the arrangement showed what was affordable.

‘When setting up the repayment arrangement with Mr X, he supplied the Council with an income and expenditure form to demonstrate what he could afford. As per the repayment arrangement Mr X agreed with the Council, when it made deductions from his wages, it took 8 months’ worth of repayments over a period of two weeks.’

Steps to take:

If your client is faced with or has in place an unaffordable AEO it will be important to:

• Contact the LA as soon as possible to ask for the action to be paused whilst you work with your client
• Check whether the client is liable for the council tax bill or whether any exemptions apply. Consider whether the client is entitled to any council tax discounts or reductions. You can read further details about this on our public page Check if you can pay less council tax.
• Consider whether the client might be able to apply for a discretionary reduction to reduce or clear the arrears. Have a look at my earlier article Discretionary council tax reduction — a how to guide.
• Treat the council tax arrears as a priority debt and if possible work out an affordable payment plan with the client.
• Discuss with the client the option of a debt remedy such as a debt relief order or bankruptcy which would clear the outstanding arrears.
• Consider entering your client into breathing space to allow time for their options to be fully considered.
• If necessary, help your client to make a complaint and escalate this to the ombudsman.

Lorraine Charlton works as a debt expert in the Expert Advice team at Citizens Advice

The information in this article is correct as of the date of publication

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