Arrears

When an employee is in arrears for payments such as tax, student loans or family tax credit overpayments, the Inland Revenue Department sends the employer a Section 157 notice. The notice tells the employer to deduct the appropriate payments from the employee's wages and explains how to calculate the required amounts.

Note: The arrears payment situation is not the same as the catch-up situation that uses a deduction with Sub-class = "Catch-up (SLCIR)".

If you receive a Section 157 notice, you need to set up an arrears payment deduction.

1. Add a deduction with a unique Code and Description.
2. On the Details (i) tab, enter the following values:

   Field	Values
   Type	D. Standard deduction
   Taxable	No
   Reducing balance	Yes
   Note: If Calculation method = "A. Arrears payment", then these Details (i) tab fields must contain the above values or you will not be able to save the Deductions record.

   

3. On the Details (ii) tab, enter the following value:

   Field	Values
   Direct credit	Yes
   This example shows how to pay electronically. If you opt to make the payment by posting a cheque or at a bank, then set Direct credit to "No" and do not enter bank details.

   

4. On the Details (iii) tab, enter the following values:

   Field	Values
   Calculation method	A. Arrears payment
   Bank account	030049-0001100-027
   Account name	INLAND REVENUE
   Bank code	ARR
   Note: When you create the Employee Loan record, you can copy across these bank details. See Arrears Payment Process.

   

For process details, see Arrears Payment Process.

Topic: 38049