Utility Bill CCJ HCEO Enforcement - Charged VAT on top of fees?

[Darrius]

Good afternoon,

 

I have a friend who has been subject to an HCEO attending. He charged them £318 in fees to visit on top of what was owed (around £800). On the break down this says £75 compliance stage,, £190 first enforcement stage, then VAT of £53.

 

Surely no VAT should be paid?

[dx100uk]

hceo's can charge vat 

whats the debt?

 

dx

[Darrius]

The debt is for a utility bill.

 

I can't see any sources where it says HCEOs can charge VAT on their enforcment fees (the ones for when they visit). Do you have a source?

[dx100uk]

Debtors are not, therefore, charged VAT on High Court Enforcement Fees, but in some circumstances do pay the VAT charged to the Claimant.  HCEOs do not benefit from VAT being charged in any way and, like all registered businesses, undertake the collection of VAT on behalf of HMRC as an accepted burden of running a commercial business.

 

 

VAT on High Court Enforcement Fees

WWW.HCEOA.ORG.UK

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Welcome to The High Court Enforcement Officers Association's Website

 

 

why did he not defend the CCJ??

 

[Darrius]

He didn't defend it because he owed it.

 

What you've posted there says that debtors pay the VAT charged to the claimant, ie the creditor. I would assume that includes the fee for instructing the HCEO and that type of thing. That would make sense as the claimant would have paid that upfront.

 

However, there's nothing that says VAT is charged on the actual enforcement fees when the HCEO visits, in fact what you've posted says that quite clearly:

 

Quote

Debtors are not, therefore, charged VAT on High Court Enforcement Fees

 

Obviously the claimant wouldn't have paid this upfront so I can't see why or how it would be added. To be clear, I'm asking about the enforcement stage fees - compliance stage, 1st enforcement stage, 2nd enforcement stage, sale stage. Where does it state that these fees attract VAT?

[dx100uk]

owing a debt is no reason to ignore a court claim, he had several options:

defend the claim

fill in the admittance form setting an affordable £PCM

entering into consent order...

 

all of these would have avoided the HCEO involvement because the debt is above £600......

 

there is no right of forced entry on consumer debt so if/if not vat is allowed by HCEO's is somewhat irrelevant...why is he even bothering to communicate with them?

 

was this a default judgement and when?

 

 

 

 

[Darrius]

This is irrelevant 'bolting the stable door' stuff and has nothing to do with the query. The debt has been paid.

 

What I'm questioning is the VAT that was added on top. There doesn't seem to be any evidence that the HCEO can charge VAT on top of the enforcement stage fees.

[dx100uk]

aw no...silly boy for paying it.....

 

as for the VAT i can see here this:

 

 

and just to be clear this was a domestic util bill not commercial.

 

[Darrius]

Yes, domestic, to EDF.

 

Well according to that link to that thread, no VAT should have been added as EDF will be registered for VAT. But even so, a link to post by a CAG member is hardly an authority, especially when it says the opposite to what the HCEOA link says

 

Quote

Debtors are not, therefore, charged VAT on High Court Enforcement Fees

 

It seems to me that VAT can only be added to fees that have been paid by the creditor, ie to instruct the HCEO and the costs of issuing any writs. No VAT can be added to court fees such as transferring to the High Court, that's certain. So for example, it may cost £100 to instruct the HCEO and £66 to transfer to the High Court (I think that's the cost). VAT can be added to the £100 (£20) as this is a service addressed to the claimant, so £120 including VAT, plus the £66, a total of £186 paid upfront by the claimant (the person owed the money).

 

If the claimant is VAT registered, he can reclaim the £20 VAT from HMRC and the debtor pays the remaining £166. However, if the claimant is not VAT registered, he can recover the full £186 from the debtor.

 

Enforcement fees play no part in this. they are a separate charge that is not a service addressed to either the claimant nor the debtor. It is a statutory charge that covers all actions of a particular enforcement stage.

[dx100uk]

Who the hceo company or a one man show?

[Darrius]

I'm not sure what difference that makes but it's CES

[dx100uk]

VBNB41720 - VAT Business/Non-Business Manual - HMRC internal manual - GOV.UK

WWW.GOV.UK

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Guidance on the meaning of business for VAT purposes and how it applies in the operation of the tax

 

[Darrius]

Well that link says VAT is only applied to fees under the relevant Sheriff's Fees Order:

 

Quote

The total fees and allowable expenses payable in respect of services provided by the different people involved are set out in the relevant Sheriff’s Fees Order.

 

 I assume that means the fees set out here:

 

The Sheriff Court Fees Order 2018

WWW.LEGISLATION.GOV.UK

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This Order makes provision for the fees payable in the sheriff court, to the sheriff clerk or the auditor of court (as appropriate).

 

Nothing about enforcement stage fees there either, so the question is still unanswered - where does it say VAT can be added to enforcement fees listed under the 2014 regulations?

 

It seems various sources are saying the should not be applied but the link provided earlier to advice on this site says it can be applied and recovered from the debtor. And indeed VAT was applied to my firend's debt. But no-one is able to provide a source to back up that assertion.

[Bailiff Advice]

You may consider that it is not relevant...but it is. Roughly when was the debt being enforced?

The matter of charging VAT on fees charged by a High Court Enforcement Officer has been the subject of much debate since 2014 when the current fee scale was implemented. 

Earlier this year a company called JUST (started by Jamie Waller....previously JBW), instigated action in the High Court regarding the charging of VAT on HCEO fees. Their view (and one that I share) is that VAT should never be payable by the debtor. 

The High Court are due to hand down their decision in the Summer and in advance of the decision, and following discussions with both the Ministry of Justice and HMRC, the High Court Enforcement Officers Association issued guidance to all their members in June this year advising that their treatment of fees should be changed as soon as possible, but in any event, by 1st August at the latest. 

In simple terms, where the instructing creditor is VAT registered (such as utility companies etc), VAT should be charged to the creditor and never to the debtor. 

In cases where the instructing creditor is not VAT registered, the HCEOA recommends that a sum equivalent to VAT should be charged to the debtor. 

 

HCEOA issues members with updated recommendation re: VAT on High Court enforcement fees

WWW.HCEOA.ORG.UK

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Welcome to The High Court Enforcement Officers Association's Website

 

PS: Once the Judgment has been handed down, it may be worthwhile for me to introduce a 'Sticky' on this subject. 

Edited August 14, 2021 by dx100uk
unnecessary post quote removed

[Darrius]

This visit only took place this week.

 

Bailiff Advice - the info you've posted above is what I've already seen, however that has been the case for many years in relation to the fees listed under the Sheriff Court Fees Order 2018. (The 2018 order is of course the current version but there will have been earlier versions).

 

That is what HMRC clarified back in 2016, however there seems to be confusion as HMRC refer to these fees under the 2018 order as 'enforcement fees' and I think this is being muddled with the enforcement fees under the 2014 regulations.

 

HMRC only state that the fees under the 2018 order attract VAT as they are fees addressed to the claimant. HMRC have never said that the fees under the 2014 regulations are subject to VAT, and indeed many reputable sources have confirmed that VAT is not to be added to these enforcement fees. The HCEOA are not helping matters by also not differentiating between the 2014 regulations fees and the 2018 fees order. They are 2 separate things.

 

At present, what the HCEOA are implying is that if a claimant is VAT registered, the EA will collect the enforcement stage fees from the debtor of say £190, then send a bill to the claimant of £38 to cover the VAT and the claimant will then reclaim this from HMRC. That seems to be madness and I cannot see how that is what is intended.

 

From what I see, VAT should not be applied to enforcement stage fees as they are not a service addressed to anyone.

 

 

[Bailiff Advice]

From your initial post, the impression given was that you had very little idea about the VAT position and were seeking advice for a friend from the forum. 

 

From your above post, you clearly know the position.....but disagree with it.

 

I will not be getting into a debate regarding  this given that as I have stated above, the guidance outlined by the High Court Enforcement Officers Association has been issued in consultation with MOJ and HMRC pending a decision from the High Court which will almost certainly be in quite some detail. 

Edited August 14, 2021 by Bailiff Advice

[Darrius]

My initial post was querying whether VAT should have been added, with the subsequent posts asking if anyone knew of a source that shows VAT can be added to enforcement stage fees. I had already seen various sources that say it shouldn't so wanted to see if anyone else knew any different.

 

From what I've seen, no, enforcement stage fees should not attract VAT, with HMRC clarifying this in 2016, and there being further clarification in 2019, but the HCEO companies simply ignored this advice, even from their own association. So far from disagreeing with that advice, I agree with it. What I'm asking for is solid evidence that states VAT can be added to enforcement stage fees, something is lacking at the moment.

 

The only source I can see is that HCEO companies have been adding it so they must be correct. I even saw an article by John Kruse in 2019 that explained that VAT should not be added. But the position we have now is the HCEOA acting weak and muddying the waters and seemingly forgetting what they advised in 2019.

[AndyOrch]

PRACTICE DIRECTION 44 - GENERAL RULES ABOUT COSTS

WWW.JUSTICE.GOV.UK

 

[Darrius]

Andyorch - what does that have to do with enforcement stage fees?

[AndyOrch]

It doesn't...its the CPR stance on VAT /Costs and litigants.

[Darrius]

Ok, so nothing to do with the query?

[Peterbard]

Hi Darrius.

Answering your question, I hope.

That's because as the law stands it should

 

The VAT act says that if the business is registered has a turnover above the prescribed limit and  that income for busines, they must pay VAT on their income, offset by any payment of output TAX by the person he provides the service for.

This applies to the judement debtor as you say. I am sure that this meant money taken initially by the the HCEO when they were originally approached by the creditor or items acquired by the Hceo in the employ of the court.

However when the under sherif  who is not an employee of the court but a self employed busines  man takes over the enforcement for "valuable consideration"

 

The fees become his income and he is responsible for any tax calculated on that income. Nothing new here.

We all pay VAT and we all cannot claim it back, that is unless we are a registered business.

The only way to get around this is to Zero rate enforcement fees

 

This was explained as being the case before 2014, I see nothing since, that alters the situation. Other than changing VAT requirements in the Act., as in Magistrates court and Council.tax enforcement

 

I have tried many times to get authoritave information from sources who are usually very helpful, why is that?

Answer on a post card please.

 

Peter

 

 

 

 

 

 

 

 

 

 

 

 

[Bailiff Advice]

The position regarding VAT on debts enforced by a High Court Enforcement Agent has been subject to legal proceedings as outlined above. As a result of this, the Ministry of Justice have just released new Guidance which has just come into force. 

 

I will try to get a new thread started tomorrow. 

[Bailiff Advice]

The new Guidance from MOJ applies to all new cases from 13th October 2021. 

 

The Ministry of Justice has stated that it intends to shortly lay a Statutory Instrument to turn the new guidance into legislation by amending the Taking Control of Goods (Fees) Regulations 2014. 

[Peterbard]

Hi yes I bet they have

 Also there will be adjustment the VAT Act but not by SI.

I think much of the confusion is because the HCEO we see are the variety taken on by the chancellor under section 2 of the courts act.

High court enforcement officers proper  cannot claim or charge VAT.  As they are employed by the court .

The value is not for a business or trade.

They are salaried.