• Association urges

Government has been urged to apply a zero rating to VAT on High Court enforcement fees by the High Court Enforcement Officers Association (HCEOA).

In its response to a Ministry of Justice consultation on the issue, the HCEOA this week said new regulations on VAT fees needed to be simple, fair and consistent. 

As it currently stands, the person in debt (the debtor) must pay 20% VAT on top of any enforcement fees they are charged.

The Ministry of Justice, in its draft guidance note, is trying to prevent debtors from being charged VAT on enforcement fees and is suggesting that instead this VAT should be paid by creditors.

The Association is asking for the draft guidance to be changed so that neither debtors nor creditors are charged VAT on debts. 

The HCEOA said enforcement officers did not want to charge debtors VAT, but currently had to follow the law. Equally, they said it would be wrong to charge the VAT to creditors, who were only pursuing money owed to them and had done nothing wrong.

The only fair way to progress, it believes, is to implement a zero-rating VAT on high court enforcement fees, so no party has to pay VAT.

The Association feels it is the fairest and most sensible approach for debtors, creditors, High Court enforcement agents and the Ministry of Justice (MoJ). 

It believes this approach: 

  • meets the Ministry’s stated objective of not charging VAT to debtors
  • would be fair to both debtors and creditors
  • will cut down on unnecessary bureaucracy
  • is simple and practical to implement, and
  • is straightforward for the Ministry of Justice to administer and regulate. 

The HCEOA believes it could be implemented within three months for all new matters going forward, making it quick and easy to introduce, whilst also meeting the MoJ’s public commitment of not charging VAT to debtors. 

VAT on High Court enforcement fees is currently charged to debtors, as set out in the current guidance produced by the VAT Policy Directorate in 2000. 

Andrew Wilson, Chairman of the HCEOA, said: “High Court Enforcement Officers welcome this move by the Ministry of Justice to begin the process of creating a uniform VAT treatment. It’s something we have been pressing for during the past six years.

“We welcome the opportunity to respond and hope the Ministry takes on board our comments with regards to its draft guidance. We feel, in its current form, the guidance is unfair to debtors and creditors and doesn’t achieve the Government’s objective of stopping VAT being charged to debtors.”

Our view is that a zero rating on enforcement fees is the only way forward.”

Andrew said if the Ministry insisted on pursuing its current approach of charging the VAT to creditors, the Association asked that it: 

  • ensures the introduction of significant changes be delayed for at least 12 months to allow the industry to recover from Covid-19 and give essential time to plan and test new systems, policies and processes
  • makes it clear that this new guidance will only apply to new cases moving forward
  • makes a number of essential changes to the draft new guidance as the current draft is unworkable, unenforceable and will not produce the desired outcomes.

The High Court Enforcement Officers Association represents members across England and Wales, who received over 104,000 writs in 2018, collecting just under £114 million in outstanding judgment debt on behalf of creditors.

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