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Councils unlawfully charging Liability Order and Summons costs at the same time


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Many councils are charging liability order costs at the same time as those incurred at the summons stage of recovery. This action is effectively catching out a larger proportion of those residents who will become liable for both of these penalties.

 

However, the Council Tax (Administration and Enforcement) Regulations 1992 state under Regulation 34 that these fees must be incurred independently when the summons is issued and when the liability order is granted. It also states in Regulations R34(5)(b) and (7)(b), that the costs should be reasonably incurred by the authority.

 

Application for liability order

 

34.–(5) If, after a summons has been issued in accordance with paragraph (2) but before the application is heard, there is paid or tendered to the authority an amount equal to the aggregate of—

(a) the sum specified in the summons as the sum outstanding or so much of it as remains outstanding (as the case may be); and

 

(b) a sum of an amount equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment or tender,

the authority shall accept the amount and the application shall not be proceeded with.

 

(6) The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid.

 

(7) An order made pursuant to paragraph (6) shall be made in respect of an amount equal to the aggregate of—

(a) the sum payable, and

 

(b) a sum of an amount equal to the costs reasonably incurred by the applicant in obtaining the order.

 

Councils are therefore unlawfully collecting penalties from debtors settling their accounts prior to any court action. This procedure is not in accordance with Regulation 34(5) of the Council Tax Regulations, which requires that the authority shall not proceed with the application if the aggregate of the outstanding debt and costs reasonably incurred by the authority is paid or tendered to it.

 

Essentially authorities are not lawfully permitted to charge debtors the liability order costs detailed in Regulation 34(7)(b) in such circumstances, however, by charging these costs prematurely at the summons stage, they are doing exactly this.

 

This was covered in the Sunday Telegraph: We shouldn't let our Councils Cheat us out of 25 Billion a Year

 

Does this mean many of our local authorities could be open to criminal investigations?

Edited by outlawla
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Many councils are charging liability order costs at the same time as those incurred at the summons stage of recovery. This action is effectively catching out a larger proportion of those residents who will become liable for both of these penalties.

 

However, the Council Tax (Administration and Enforcement) Regulations 1992 state under Regulation 34 that these fees must be incurred independently when the summons is issued and when the liability order is granted. It also states in Regulations R34(5)(b) and (7)(b), that the costs should be reasonably incurred by the authority.

 

 

 

Councils are therefore unlawfully collecting penalties from debtors settling their accounts prior to any court action. This procedure is not in accordance with Regulation 34(5) of the Council Tax Regulations, which requires that the authority shall not proceed with the application if the aggregate of the outstanding debt and costs reasonably incurred by the authority is paid or tendered to it.

 

Essentially authorities are not lawfully permitted to charge debtors the liability order costs detailed in Regulation 34(7)(b) in such circumstances, however, by charging these costs prematurely at the summons stage, they are doing exactly this.

 

This was covered in the Sunday Telegraph: We shouldn't let our Councils Cheat us out of 25 Billion a Year

 

Does this mean many of our local authorities could be open to criminal investigations?

 

 

That would only work if the council were specifically charging costs for a liability order at the summons stage - the council can charge a summons cost and may elect not to charge for the liability therefore the costs at the summons stage are for those incurred to that point.

 

If a person wishes to challenge the costs they can do at the liability order hearing.

 

 

(b) a sum of an amount equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment or tender,

 

The costs in applying for a liability order can be incurred prior to the liability order hearing and can be charge at the summons stage as the costs are incurred in preparing the hearing and the court will charge for each liability order the council applied for. The costs can include the admin costs in preparing the case.

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ss002d6252,

 

I can see that these would likely be the kind of arguments put forward by councils upon being challenged legally on this issue.

 

I'm interested to know what your thoughts are with respect to the following circumstances:

 

North East Lincolnshire council previously formulated its penalty fees by charging £35 for a summons penalty and then £25 for obtaining a liability order.

 

It then combined them into one penalty, incurred conventionally at the summons stage and now called the summons fee/costs. The overall associated court fee, took a 23% hike and has risen from £57 to £70.

 

Would this not be specifically considered charging costs for a liability order at the summons stage? Especially as recent history of the charging structure provides evidence that this is the case.

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Would this not be specifically considered charging costs for a liability order at the summons stage? Especially as recent history of the charging structure provides evidence that this is the case.

 

I would expect the council would say that they have reviewed where in the systen the costs are incurred and that the vast majority are pre Liability Order stage therefore they are charging the new , revised, costs at that point.

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The following data was supplied by North East Lincolnshire council. If a possible review by the council found that the vast majority of costs were incurred before the liability order stage, then what must be brought into question is how – historically – these costs were determined, and more importantly, how the Magistrates' court had been able to authorise, with any credibility, the level of costs.

 

SummonsLiabilityOrders.jpg

 

Summons costs in 2000/01 represented 23.5% of associated court costs.

 

In 2001/02 this reduced slightly to 22.2%, but increased to 30% in 2002/03.

 

In 2004/05 the scales tipped, and for the first time, more weight was given the summons penalty – it was then 54.5%.

 

Another small increase to 56% in 2006/07 saw the balance unchanged for a while and the overall costs had also stabilised.

 

This changed in 2011/12 with the most radical shift in the weight given to the summons costs. The council now consider 100% of its costs, up unto obtaining the liability order, are attributable to issuing a summons.

 

There must have been radical changes in the way recovery operations were carried out at the council for the authority to proportion the cost of obtaining a liability order to summons at roughly 4:1 in 2001/02, when today this cost is deemed so insignificant, that 100% is attributable to the summons.

Edited by outlawla
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The council now consider 100% of its costs, up unto obtaining the liability order, are attributable to issuing a summons.

 

 

Or they have deciced that the level of costs in incurring the summons is the most they can feasibly recover and therefore wont charge for the Liability Order - there have been massive changes in council funding and many costs that were previously being absorbed or offset are no longer done so.

 

Also remember that there is nothing to require that they do charge for the Liability Order.

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Assuming for now that:

 

a) the council is arguing that costs incurred by these alleged non-payers of council tax, have historically never covered the council's costs.

 

b) the authority has gradually adjusted how these charges are proportioned for the optimum revenue, i.e, the maximum permissible is now all charged at the summons stage (though still at a level below the actual costs incurred by the council up until issuing the summons).

 

Given the above, the challenge would have to turn to whether the council's perception of which costs it considered valid, were realistic.

 

For example, an authority may consider that running a council tax section, should incur the full expenditure of that department, as costs – even if its activity was not specifically dedicated to recovery work.

 

The likelihood is that such a department would exist regardless of any recovery work undertaken. Further more, with the automated nature of initiating and producing reminder, threatening letters and summonses, the costs would unlikely increase proportionally with the number of summons issued.

 

To demonstrate my point:

 

100 summonses with fixed costs (staff, computer program etc) and variable costs (stationary, postage etc) comes out at £500 or £5 for each summons.

 

If variable costs were £1/document, then producing 1,000 of these, would cost approximately £1,400 or £1.40 for each summons.

 

10,000 would reduce the price per summons to around £1.

 

The benefits with regards cost effectiveness of mass producing these documents would be largely eliminated as I should think councils have a rough idea how many residents they will be taking to court each year.

 

North East Lincolnshire Council supplied these figures to give an itemised breakdown of costs, justifying that bringing court action against each resident would total £70.

 

Revenuesbudget.jpg

 

Under the header "Application for liability order" in the Council Tax (Administration and Enforcement) Regulations 1992, it doesn't permit costs for "DEBT COLLECTION" to be included in the costs reasonably incurred by the authority in connection with the summons penalty.

 

According to regulations 34(5)(b) and 34(7)(b), they only permit costs reasonably incurred by the authority up to obtaining the order. The regulations do not provide for costs, after the order has been obtained, to be included in the costs reasonably incurred.

 

Application for liability order

 

34.–(5)(b) a sum of an amount equal to the costs reasonably incurred by the authority in connection with the application up to the time of the payment or tender,

 

(7)(b) a sum of an amount equal to the costs reasonably incurred by the applicant in obtaining the order.

 

So, discounting everything else for now, the £616,700 detailed under "DEBT COLLECTION" should not be included as costs attributable to obtaining a liability order, if as the category suggests, it relates to enforcement.

 

This is not the end of the matter however. It seems irregular that a figure of £738,500 is listed under the header "DEBT COLLECTION" when councils boast that private bailiff firms come at nil-cost to the authorities.

 

These figures supplied by the council give an idea of the money involved with respect to just one court hearing.

 

  • 3,359 Summonses sent out for court hearings (2nd June 2011)
  • 2,602 Incurred Summons costs of £70

Revenue income for these costs:

  • North East Lincolnshire Council £174,334
  • Her Majesty's Court Service £7,806

As only 2 of the 3,359 summoned residents actually had court hearings, the half hour's Magistrates' time meant the court was on an hourly rate of £15,612.

Edited by outlawla
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Bailiff's are normally 'no cost' as they fund themselves through the fees collected by the council passing debt to them.

 

In any case council tax 'debt' begins once a person defaults on payment (more so if they fail to pay a reminder within 7 days). The cost of a council tax recovery section doesn't just start once a Liability Order has been issued.

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ss002d6252;3708425,

 

Thanks for your input.

 

I get the feeling any council under scrutiny from accusations of profiteering, will have all arguments at the ready.

 

Bailiff's are normally 'no cost' as they fund themselves through the fees collected by the council passing debt to them.....

 

Yes! This was the point I made in my previous post, but as you went on to say:

 

...In any case council tax 'debt' begins once a person defaults on payment (more so if they fail to pay a reminder within 7 days). The cost of a council tax recovery section doesn't just start once a Liability Order has been issued.

 

 

blank blyou seem to be implying the sum under 'DEBT COLLECTION' in the figures below are not – as the header suggests – in any way connected with the physical act of collecting debt which would commence after the liability order had been obtained. Rather, that this cost has derived from the date triggered automated letter/summons generation up until and including the summons document being sent out.

 

Revenuesbudget.jpg

In the absence of an explanation as to what the above figures specifically relate, or should I say more accurately, because of the council's refusal to explain, I'm restricted to interpreting them as best I can.

 

It would be interesting to know what the £507,000 under the header 'CONTROL & MONITORING' has been included for in the costs incurred, well, at least 20% of that figure which is attributable to Council Tax recovery. If, as one may reasonably assume, this cost relates to the council's monitoring and controlling of its contractors (20% of this being Rossendales Ltd), then this would not be allowable under Regulation 34 of the Council Tax regulations.

 

However, if this cost relates to some council activity carried out up until the summons being issued, this brings into question why this is not included in the other costs categories.

 

With regards the 'COUNCIL TAX' category, and 50% of that attributable to Council Tax recovery. I would suspect, given the half a £million plus costed to 'DEBT COLLECTION' this is an attempt to have a larger proportion of the authorities council tax administration paid for by 'caught-out residents', rather than cover the cost of that which is attributable to Council Tax recovery.

 

A comparison between the amount incurred by the alleged debtor for being issued a summons, and the amount a bailiff can lawfully charge may put things into perspective.

 

First consider the fees a private firm of bailiffs are lawfully entitled to charge the alleged debtor. This would amount to a maximum of £42.50 for two visits to the debtors home (assuming they operate lawfully).

 

Contrast this with the council's £70 summons penalty, a figure 65% higher than the bailiff's charge, and there has been no need for any physical involvement, only administrative work largely taken care of by automatically functioning systems.

 

It is remarkable that a private company can charge at such a low level in comparison to the council, especially when these fees manage to cover bailiff's and office staff's wages and additionally keep company directors etc, in the millions to which they have become accustomed.

 

I have remembered some information supplied by the council which may be quite crucial

 

The costs raised are to cover the cost of COUNCIL TAX COLLECTION and recovery. This includes the technological systems in place and employment of staff. Costs collected also cover monies paid to Her Majesty's Court Service for the use of their facilities. The monies raised from costs are not greater than the COST OF THE SERVICE.

 

In my opinion, this has significance on two levels. Firstly the council has included Council Tax collection in its assessment for recovery costs which is not only unfair to expect penalised residents to subsidise the collection of council tax, but it contravenes R34 of the Council Tax Regulations.

 

It seems, by the council stating: "The monies raised from costs are not greater than the COST OF THE SERVICE", it is misleading you to think the SERVICE is council tax recovery when in fact it is referring to council tax collection in general.

 

Secondly, the council states that: "Costs collected also cover monies paid to Her Majesty's Court Service for the use of their facilities"

 

I don't think there is any question that the money paid to the court, is money associated with obtaining the liability order. More importantly though, the council is more or less saying that these costs collected, are specifically to cover or go towards obtaining the liability order. I have considered the following before coming to my conclusion:

 

Or they have deciced that the level of costs in incurring the summons is the most they can feasibly recover and therefore wont charge for the Liability Order - there have been massive changes in council funding and many costs that were previously being absorbed or offset are no longer done so.

 

Also remember that there is nothing to require that they do charge for the Liability Order.

 

For the sake of argument, I accept it could be possible for the recovery costs incurred by the council, up until issuing the summons, do exceed the £70 penalty charge. However, by the council's own admission it has specifically stated that "Costs collected also cover monies paid " in obtaining the liability order.

 

For this reason, it could be reasonably argued (regardless of whether or not the £70 summons fee covers all incurred costs to the council), that a disproportionate amount is collected in penalties from debtors who settle their accounts prior to any court action. Although there may be nothing to require that they do charge for the Liability Order, the council has now and historically – to varying degrees – given sufficient evidence that a distinction exists.

Edited by outlawla
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  • 1 month later...
...If a person wishes to challenge the costs they can do at the liability order hearing...

 

Is there any reference to this in the Council Tax (Administration and Enforcement) Regulations 1992, or any other legislation?

 

I believe councils state that you should only attend the hearing if you dispute your liability, which could be understood to mean your council tax liability and not the added costs. Some councils specify which defences an alleged debtor holds to challenge liability, but never noticed costs were one of them.

 

How can the council or the Magistrates' court know that costs will be the same with respect each liability order application? The number applied for will vary, and therefore so should the costs. The higher the number rubber stamped will correspondingly reduce the costs attributable for each individual and therefore it should not be possible for the summons to state on it a fixed amount of costs.

 

The following from the 1993 Department of the Environment Council Tax Practice Note 9, suggests that these costs should not merely be an estimate of what costs authorities incur in the collection of council tax, divided by a forecasted number who will incur them:

while it is likely that authorities will have discussed a scale of fees with the Clerk to Justices it should be recognised that the Court may wish to be satisfied that the amount claimed by way of costs in any individual case is no more than that reasonably incurred by the authority

Found on page 8 of the document:

 

Another point:

 

Although a decision by magistrates to issue a summons involves the exercise of a judicial function, and is not merely administrative, isn't a summons merely machinery for giving a defendant notice of the proceedings, not a demand for costs? If this is the case, how is it possible for the council to impose summons costs on the strength of a summons?

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  • 3 months later...
  • 2 years later...

I'm interested to know what your thoughts are with respect to the following circumstances:

 

North East Lincolnshire council previously formulated its penalty fees by charging £35 for a summons penalty and then £25 for obtaining a liability order.

 

It then combined them into one penalty, incurred conventionally at the summons stage and now called the summons fee/costs. The overall associated court fee, took a 23% hike and has risen from £57 to £70.

 

Would this not be specifically considered charging costs for a liability order at the summons stage? Especially as recent history of the charging structure provides evidence that this is the case.

 

I would expect the council would say that they have reviewed where in the systen the costs are incurred and that the vast majority are pre Liability Order stage therefore they are charging the new , revised, costs at that point.

 

If the council claimed that the vast majority of expenditure is incurred "pre Liability Order stage", this would be at odds with Chiltern District Council's 16 March 2010 Cabinet report reviewing Council Tax Court Costs.

 

The report provides a valid argument against all councils giving greater weight to the cost of issuing a summons than the additional charge of obtaining the liability order. Though those authorities that front load the costs entirely in respect of instituting the summons (Haringey Borough Council at £125 is a good example) there's an even greater argument.

 

Evidence that the Council Tax regulations are being breached lies in its statement at paragraph 4 of the report where the authority openly admits that:

 

"
most of the costs the Council incurs arise from the application for a liability order at Court and the additional work required to secure payment once we have the liability order
.

Chiltern currently charges 52% of its total £125 costs on issuing the summons (£65).

 

Essentially any costs it claims for work once they have obtained the liability order is unlawful and in any event, they have admitted to the fact that the majority of costs (they are lawfully entitled to) is NOT incurred on instituting the summons, but from the application for a liability order at Court.

 

Just as a final insult to the taxpayer, the document reveals that the proposed changes i.e., introducing costs on the issue of summonses and increasing the overall amount, was a budgetary measure to plug a gap in its finances by achieving a 10% saving on the Revenues Service budget:

 

5. Chiltern does not currently charge costs on the issue of a summons as we consider it provides an incentive for debtors to pay the full amount due before the court hearing, so as to avoid increasing their debt by the application of costs. There is evidence to suggest that this strategy has largely been successful as demonstrated by the high collection rates achieved at Chiltern.

 

6. However in view of the requirement to achieve a 10% saving on the Revenues Service budget over the next four years it is time to review this approach.....

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