StepChange comments on High Court bailiff VAT error

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.”