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  • VAT on High Court Enforcement Fees

The High Court Enforcement Officers Association has written to all of our members with an updated recommendation regarding the treatment of VAT on High Court Enforcement fees.

This document answers the most Frequently Asked Questions we are receiving on this important topic. You can read our full statement here.

The updated recommendation has been made now following further discussions with the Ministry of Justice and HMRC.

We have recommended to all members that their treatment of VAT on High Court enforcement fees should be changed as soon as is practical, and at the latest with effect from 1st August 2021.

The new HCEOA recommendation outlines different procedures for dealing with VAT registered and non-VAT registered creditors.

What is the High Court Enforcement Officers Association’s new recommendation regarding VAT on High Court Enforcement fees?

While we are awaiting final confirmation of the new guidance from the Ministry of Justice and HMRC, we are anticipating this will reflect the two-tier system currently outlined in the Government’s draft guidance (March 2020) and are recommending this approach to our members as a result.

Moving forward, the 20% VAT will now be paid by creditors where the creditor is VAT registered. Debtors will still have to pay an amount equivalent to VAT if the creditor is non-VAT registered.

Who pays VAT on High Court Enforcement fees for Writs of Control if a creditor is VAT registered?

Where the creditor (and not their solicitor or agent) is VAT registered, VAT should be charged to that creditor and no VAT should be charged to the debtor. 

A VAT Invoice should be issued to the creditor and that VAT should be accounted for to HMRC in the usual way by the High Court Enforcement business.

Who pays VAT on High Court Enforcement fees for Writs of Control if a creditor is non-VAT registered?

As of today, there is no change to the current position. The recommendation is that an amount equivalent to VAT on the High Court Enforcement fees is collected from the debtor in these cases, as has been the case for many years.

However, the position in respect of non-VAT registered creditors has not been clarified. We await further guidance, either in the current proceedings or via a clarification from the Ministry of Justice on non-VAT registered creditors.

If or when further guidance is published we will reflect that on our website.

Who pays VAT on High Court Enforcement fees for Writs of Possession?

High Court Enforcement Fees for Writs of Possession are agreed between the High Court Enforcement Officer and their client. VAT is charged to the creditor. Land or property owners seeking to enforce Writs of Possession can claim back any VAT on these fees from HMRC in the usual way if they are VAT registered.

Who pays VAT if the enforcement is not successful?

In cases where no money is recovered, the creditor continues to be responsible for the compliance fee (or abortive fee), and VAT is added to this fee when an invoice is issued to the creditor. The creditor can then reclaim this amount from HMRC on their next VAT return if they are VAT registered.

What does this change mean for me if I owe someone mone and have been served with a Writ of Control?

In many cases, it means that you will pay less. If the person or organisation you owe money to is VAT registered, no VAT will be added to the High Court Enforcement fees that you have to pay.

However, if the person or organisation you owe money to is non-VAT registered you will still need to pay a VAT equivalent amount. This should be 20% of any enforcement fees added, not 20% of the total amount you owe.

Can you give any examples of what this will mean in a case where the creditor is VAT registered?

In the case below, the debtor owes the creditor £1,000 for a judgment.

The High Court Enforcement Officer is instructed and sends a Notice of Enforcement. The fee for this is £75.

The debtor fails to make contact and an Enforcement Agent visits their address. This is Enforcement Stage One and a fee of £190 is added to the total amount due.  

The High Court Enforcement fees are:

£75 - Notice of Enforcement

£190 - Enforcement Stage One

£265 - Total

The VAT at 20% of £265 is £53.00.

With the new guidance, the debtor should pay the £1,000 for their judgment, and the enforcement fees of £265 a total of £1265.00

The VAT-registered creditor should be charged £53 by their High Court Enforcement Officer, which they can claim back from HMRC in their next VAT return.

It will be up to individual High Court Enforcement businesses whether this sum is deducted from the amount paid to the creditor or whether they issue a separate invoice to the creditor to account for VAT. This will be in the terms of business of the High Court Enforcement business.

Can you give any examples of what this will mean in a case where the creditor is non-VAT registered?

Using the same example, the debtor owes the creditor £1,000 for a judgment.

The High Court Enforcement Officer is instructed and sends a Notice of Enforcement. The fee for this is £75.

The debtor fails to make contact and an Enforcement Agent visits their address. This is Enforcement Stage One and a fee of £190 is added to the total amount due.  

The High Court Enforcement fees are:

£75 - Notice of Enforcement 

£190 - Enforcement Stage One

£265 - Total

The VAT at 20% of £265 is £53.00 which is added to the amount due

At this stage, the debtor should pay:

£1000 - Their judgment

£265 - The enforcement fees 

£53 - VAT equivalent based upon the costs 

With the new guidance, the debtor should pay the £1,000 for their judgment, and the enforcement fees of £265 and the £53 VAT equilvent a total of £1318.00

The creditor should not have to pay VAT.

When does the new recommendation take effect?

We have recommended that our members change their treatment of VAT as soon as practical, and at the latest with effect from 1st August 2021.

The date each High Court Enforcement business implements these changes may vary depending on their individual processes.

Why is this changing now?

The updated recommendation has been prompted by discussions with the Ministry of Justice and HMRC.

Whilst there is a current court action that relates to a specific VAT registered creditor, our understanding is that it is likely to lead to a wider clarification of the rules, meaning that VAT should not be charged to the debtor where the creditor is VAT registered.

How was VAT on High Court Enforcement fees treated previously?

Under the previous government guidance, the debtor had to pay a 20% sum equivalent to VAT on top of any enforcement fees that were charged in all cases, regardless of the creditor’s VAT status. This was set out in the VAT Policy Directorate in 2000. 

Debtors have been responsible for paying VAT on High Court Enforcement fees in this way since 1977.

Does the High Court Enforcement Officers Association support the updates to the treatment of VAT?

We have been pressing for reform and clarification of the guidance for the past seven years and are still awaiting a final decision from the Government.

We strongly believe – and made the case in our response to the Government consultation last year  – that the best option moving forward would be for VAT on enforcement fees to be treated as if it were zero rated, and we will continue to campaign for that solution.

This would have been fair to debtors and creditors, quick and easy to introduce, and would have met the UK Government’s public commitment of not charging VAT to debtors.

Who should I contact if I have a query about the new recommendations?

If you are a creditor and have further questions about your specific situation, please speak to the High Court Enforcement business working on your behalf.

If you are a debtor and have further questions about your specific situation, please speak to the High Court Enforcement business that has contacted you about the debt.

If you are a member and would like more information, then please contact the Chair or Vice Chair of the High Court Enforcement Officers Association.

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