The treatment of VAT on High Court enforcement fees payable under Writs of Control is set to change. This news is particularly relevant if you are either a debtor or a VAT-registered creditor.
The High Court Enforcement Officers Association (HCEOA) has issued new recommendations for creditors and their agents to follow. The move comes ahead of expected new guidance from the UK government, which has been prompted by an ongoing court case.
The recommendations relate specifically to the payment of VAT on High Court enforcement fees, payable under Writs of Control. Going forward, the procedure depends on whether the judgment creditor is VAT-registered or not.
If a Judgment Creditor is VAT registered
If a judgment creditor is VAT registered, VAT should now be charged to that creditor, as opposed to the debtor. The creditor will receive a VAT invoice and the tax can be reported to HMRC in the usual way. This represents a significant departure from the previous practice.
If a Judgment Creditor is not VAT Registered
If the judgment creditor is not VAT registered, then the process will remain the same for now. In other words, a sum equivalent to VAT should be charged to the debtor. However, this policy could be subject to change. Further clarification from the UK government is anticipated.
What Does This Mean For You?
This will have implications if you are currently in the midst of High Court enforcement proceedings, whether as a creditor or a debtor.
As a debtor, it could mean that you end up paying less than you would have previously – but only if your creditor is VAT registered. If so, VAT will not be added to your High Court enforcement fees.
As a creditor, it could mean that you end up bearing the cost – but again, only if you are VAT registered. This sum can be reclaimed from HMRC on your next VAT return. In the meantime, you will either receive an invoice from your enforcement agency (which may be your solicitor), or the sum will be deducted directly from the monies recovered from the debtor.
When is This Happening?
The HCEOA has said these changes should be implemented as soon as practical, and no later than 1st August 2021. At Altion Law, we have already prepared to roll out these recommendations by the deadline. If you are pursuing a debt claim with us and you are VAT registered, our solicitors can discuss the position in greater detail with you.
Could Further Changes be in the Pipeline?
The government guidance has not yet been released, so a greater clarification of the rules is expected in the not-too-distant future. However, the HCEOA has issued these recommendations following discussions with the Ministry of Justice and HMRC, so it is likely that the two-tier system will remain in place for now. Even so, the HCEOA has said it will continue to campaign for a zero-rated approach. This, it argues, would be fair to both creditors and debtors.
Speak to our Solicitors
We act as enforcement agents for those seeking to recover debt. We also represent individuals and businesses who are going through bankruptcy and insolvency proceedings. Whether you are a creditor or you are in debt, our solicitors can help.
If you would like to have a free confidential discussion with a member of our team, please either make a Free Request For Call Back or call us directly on 01908 414990 and we will be pleased to help you.