StepChange comments on High Court bailiff VAT error
Debtors have been charged 20% more than they should have been and must be repaid
5 November 2019
High Court Enforcement Agencies (High Court bailiffs) have been incorrectly charging VAT on top of their fees to debtors as a result of a misinterpretation of the 2014 Taking Control of Goods Regulations, when these should instead have been charged to creditors.
New clarification by the Government that this should not be happening has just emerged. StepChange Debt Charity believes that the Ministry of Justice and HM Revenue and Customs now need to ensure not only that the guidance to firms about charging is completely clear, but also that any VAT on fees which has been wrongfully charged to and paid by debtors is refunded.
StepChange provided evidence back in 2017 that nearly one in five clients surveyed reported being charged VAT on top of bailiff fees [see Taking Control report, p 20]. Unequivocal Government clarification of the correct approach – that the debtor is not required to pay the VAT – was given on 29 October in an answer (HL 133) given in the House of Lords. Efforts to obtain clarification on the correct approach were led by a firm active in the High Court Enforcement sector [see notes to editors], whose estimates suggest that up to £36 million may have been wrongly charged to debtors over the past six years. Action is now needed to resolve the problems caused.
Peter Tutton, head of policy at StepChange Debt Charity, blogs on the issue here and comments:
“There are multiple problems affecting how the bailiff sector operates in practice. In this latest example, it’s shocking that people in debt who can least afford it have been wrongly charged the 20% VAT on fees that should have been paid by the creditors instructing the High Court writ enforcement firms. The Ministry of Justice and HM Revenue and Customs must now require firms to automatically refund anyone affected. In the meantime, anyone who believes they have wrongly been charged should write to the High Court Enforcement company that they paid, to reclaim the wrongly charged VAT.”
“This is another example where the lack of effective oversight of the bailiff sector has caused consumers harm. We eagerly anticipate a plan from the Ministry of Justice to take forward the reform of bailiff regulation. We strongly urge the next Government not to lose sight of this important element of necessary legislative reform. The bailiff sector as a whole needs tighter regulation, as ongoing errors and problems demonstrate.”
Notes to editors
- Further background information about the VAT issue may be obtained from Just, a digital marketplace offering judgment creditors access to High Court Enforcement companies throughout England and Wales, which undertook eight weeks of campaigning to obtain clarification and has published this statement and blog. Just media contacts: Sophy Norris: email@example.com, 07930 385 849 Kelsey Ryan: firstname.lastname@example.org, 07367 376 076.
- The response to the recent Ministry of Justice consultation on bailiff regulation reform by the Taking Control campaigning coalition of organisations, including StepChange, outlines the reasons why regulatory reform more widely is essential to improve practice and provide adequate protections in the debt enforcement sector.
- This VAT issue applies only to High Court enforcement firms (not other types of bailiff – click here for a StepChange explainer on High Court enforcement and when it might be used). This in itself is an example of how confusing the landscape is for individuals who find themselves facing enforcement action. The Government’s consumer advice page about bailiffs describes the different types as:
- ‘certificated enforcement agents’
- ‘high court enforcement officers’
- ‘county court and family court bailiffs’
- ‘civilian enforcement officers’
About StepChange Debt Charity
StepChange Debt Charity is the UK’s largest debt advice charity, contacted by around 600,000 people a year and providing free, full, independent debt advice to more than 300,000.
Since 2006, our online debt advice service has help over 1.7m people receive the help they need manage their finances and tackle their debts.
Founded in 1993, StepChange supports people experiencing debt problems through telephone and online services, and campaigns for change to reduce the harm and stigma associated with debt.