You are here: Home - Credit Cards & Loans - News -

High Court bailiffs incorrectly charging debtors VAT

Written by: Emma Lunn
Up to £36m in VAT on bailiffs fees may have been wrongly charged to debtors over the past six years.

Government clarification shows that High Court enforcement agencies have been incorrectly charging VAT on top of their fees to debtors.

The error came about as a result of a misinterpretation of the 2014 Taking Control of Goods Regulations. The VAT should instead have been charged to creditors.

Debt charity StepChange is calling for the Ministry of Justice and HMRC to ensure not only that the guidance to firms about charging is completely clear, but also for VAT that has been paid by debtors to be refunded.

The charity provided evidence in 2017 that nearly one in five clients surveyed reported being charged VAT on top of bailiff fees.

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 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 whose estimates suggest that up to £36m may have been wrongly charged to debtors over the past six years.

Peter Tutton, head of policy at StepChange Debt Charity, said: “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 per cent 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.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Everything you wanted to know about ISAs…but were afraid to ask

The new tax year is less than a fortnight away and for ISA savers or investors, it’s hugely important. If yo...

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week