MY CIPP
The CIPP’s Advisory Service team provides answers to popular questions
Concurrent direct earnings attachments (DEAs) Q: What is the process regarding applying two individual DEAs to an employee’s payroll record? Could you advise if it’s possible for two orders issued for the same person to run concurrently? A: The first DEA should be deducted, which will reduce the amount of attachable earnings. The second DEA can be taken, providing the employee still has 60% of their net earnings left. It could be the case that the full amount of the second order cannot be taken, so a partial deduction can be made up to the protected earnings level. The protected earnings rule applies even where there’s instruction to apply a fixed DEA deduction rate. The maximum amount which can be deducted for a DEA is 20% of the net earnings if deductions are being taken at the standard rate, or 40% if deductions are being taken at the higher rate. For further information, refer to the Direct earnings attachment: a more detailed guide (http://ow.ly/tg8450L8yh8). Holiday purchase and national minimum wage (NMW) Q: We’re considering new benefits for tax year 2023/24, and one of the options is holiday purchase. Some employees’ pay would fall below the NMW if they participated in the holiday purchase schemes, so could we take net deductions of holiday purchase from them if they were to opt-in to the scheme? A: If employees are earning the NMW rate
What qualifies as a business expense? Q: An employee is working on a project to move a science lab from one building to a newly constructed one. During this time, he’ll be staying in a nearby hotel, as he’ll be expected to work long hours, starting early in the morning and working late into the evening. Even though it’s near his place of work, will this expense be classed as a business expense, rather than having to be recorded on a P11D, due to the long unsociable hours? A: To qualify under Section 336 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003, the expenditure needs to be incurred wholly, exclusively and necessarily in the performance of the duties of the employment. The responsibility for justifying these tests have been met is on the employer. This type of expenditure qualifies for an exemption or a deduction where it’s part of the cost of travel necessarily incurred in the performance of the duties, or for necessary attendance at a temporary workplace. In general, payments by an employer for an employee’s accommodation and subsistence when staying away from home overnight on business aren’t taxed. Please see: http://ow.ly/F5sU50L8R3q for further information. Paying above the approved mileage rate Q: We’re considering paying more than the approved mileage rate to our employees. For example, if paying 50p per mile (5p above the approved rate),
of pay, or just above, any salary sacrifice arrangement will likely reduce their pay below the NMW rate and create a potential compliance issue. In answer to your question, no, the holiday purchase value cannot be deducted from net pay. A salary sacrifice is a contractual arrangement in which an employee forfeits gross salary, in exchange for a non-cash benefit, which then reduces pay before tax and National Insurance contributions (NICs) are calculated, and, therefore, cannot be a net deduction.
How would holiday purchase salary sacrifice schemes interact with the real living wage?
| Professional in Payroll, Pensions and Reward | November 2022 | Issue 85 10
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