VBNB41720 - Specific issues: High Court Judgments and County Court Judgments transferred to the High Court for enforcement.

Services of the High Court Enforcement Officers

The High Court Enforcement Officers are registered Officers of the Court who are authorised to enforce orders (i.e. collection of unpaid debt) issued by the High Court or transferred from the County Court to the High Court.

Debt collection services carried out by the High Court Enforcement Officers are regarded as being supplied in the course or furtherance of their business. If the High Court Enforcement Officer is registered for VAT, they will charge and account for VAT on their services and they will be entitled to recover the VAT as input tax subject to normal rules.

High Court Enforcement Officer who is a partner

If the High Court Enforcement Officer is:

  • a partner in a legal firm; and
  • the fees earned from his services are paid into the firm’s account or are otherwise accounted for by the partnership

their services are regarded as being supplied by the partnership and not by the High Court Enforcement Officer personally.

Recipient of the supply

The services of enforcing the High Court judgment and County Court judgment debts that are referred to the High Court are supplied to the creditor even in situations where the debtor pay the enforcement fees. In all circumstances the creditor is liable for the VAT charged by the High Court Enforcement Officer.

Therefore, where:

  • the judgment creditors are registered for VAT; and
  • the debt relates to their taxable business activities

the VAT on the High Court Enforcement Officers services may be recovered by the creditors subject to normal rules.

If the judgment creditor is unable to recover the VAT because they are not registered for VAT, the High Court Enforcement Officer can recover an amount equivalent to the VAT charged as enforcement costs from the debtor, where this represents real cost to the creditor.

Services associated with debt recovery

There are other service providers who are involved in High Court debt recovery work, for example locksmiths, auctioneers or removal men. These suppliers are also regarded as making taxable supplies in the course of their businesses. Their services are in connection with the enforcement of the judgment debts, and they are supplies to the High Court Enforcement Officers where appropriate.

Invoicing and Accounting for VAT

High Court Enforcement Officers must charge VAT on their services and issue VAT invoices to the creditors. This also applies when the debtor pays the enforcement fees. Any documents issued to debtors should make it clear that they are not VAT invoices.

County Court judgments

Services of a Bailiff

When a warrant is issued by a County Court for the recovery of a debt the recovery action is carried out by a bailiff who is a civil servant. VAT is not chargeable on the cost of their services because these bailiffs are employees.

Where necessary the Court will appoint independent businesses such as removal men or auctioneers to carry out specific duties. These businesses provide standard-rated services to the Court. The costs of enforcement, including VAT, are recoverable from the debtor.

Magistrates’ Court judgments

Court warrants/fines

Magistrates Courts hear many cases of minor misdemeanours and often impose fines as a result. Unlike County Court bailiffs, Magistrates Court bailiffs are not employees of the court system. They are separate people for VAT purposes. Therefore services provided by Magistrates Court bailiffs to enforce the Court fines are liable to VAT.

These services are supplies to the Courts and the tax on them is recoverable under section 41(3) of the VAT Act 1994 by the Ministry of Justice, under whose control the Courts fall.

Distress for rates warrants

Certified bailiffs involved in distraint procedures following the issue by a Magistrates Court of a distress warrant for council tax or business rates are regarded as holding public offices. The services of certified independent bailiffs in these circumstances are supplied to the creditor. The creditor is the local authority which instructs them.

The services of auctioneers, removal men and other tradesmen engaged by the bailiff are supplied to the bailiff. However, if an authority employs its own bailiffs the services of auctioneers and tradesmen are supplied to the authority.

Value of supply

The value of the bailiff’s services is the total amount of fees and expenses recovered under:

  • the Distress For Rates Order 1979 (as amended by the Distress for Rates (Amendment) Order 1989);
  • the Community Charges (Administrations and Enforcement) Regulations 1989; or
  • the Local Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989

plus any commission received from the local authority.

Recovery of VAT from the distrainee along with the other fees and expenses of the bailiff is allowed under:

  • the Community Charges (Administration and Enforcement) Regulations 1989, Article 3(4) of Schedule 5; and
  • the Local Non-Domestic Rating (Collection and Enforcement) Regulations 1989, Article 3(4) of Schedule 4

However, the earlier Distress For Rates Order 1979 was not amended to allow similar recovery of VAT. This meant that VAT on bailiffs’ fees could not be charged to and recovered from the distrainee. Consequently a special procedure was introduced.

Invoicing, accounting and input tax

To support their entitlement to input tax deduction a bailiff has to have tax invoices from the auctioneer, removal men or other tradesmen. The local authority needs tax invoices from the bailiff to support its claim under section 33(1) of the VAT Act 1994.

A bailiff can issue two separate invoices:

  • one for the commission; and
  • one for the statutory fees and expenses.

A bailiff may submit periodic invoices to a local authority for the total services supplied within the period. Where they do so, these invoices can show the individual charges as a single comprehensive total. However, the invoice must be cross-referenced to the documents relating to the individual fees included on the invoice. Copies of these subsidiary documents must be available for inspection at both the bailiff’s and the local authority’s premises.

Documents supplied to distrainees by bailiffs must be endorsed “this is not a tax invoice” so that they cannot be taken for tax invoices.

VAT incurred by bailiffs and other registered persons on their own overhead expenses may be treated as input tax and deducted in accordance with the normal rules.