Taking Control of Goods (Fees) (Amendment) Regulations 2021

Lord Best Excerpts

Thursday 13th January 2022 Lords Chamber

[Lord Thomas of Gresford (LD)]

My Lords, it is a great pleasure to follow the noble Baroness, Lady Meacher, in her very clear and lengthy exposition of the position. I applaud her efforts and seek to follow in her footsteps.

In his Written Statement on 18 November, the Under-Secretary of State for Justice, James Cartlidge, said:

“While we take the view that the taking control of goods legislation when considered … with the common law position permits the recovery of VAT costs from debtors in this way, we have accepted … that this is an area where it would be beneficial to set out the position in regulations to put the matter beyond doubt.”—[Official Report, Commons, 18/11/21; col. 34WS.]


Well, they have done that, but some questions remain.

In enforcing a debt there are three parties: the judgment creditor, the judgment debtor and the enforcement agent. What this instrument does is permit the enforcement agent to recover from the judgment debtor a sum of money equivalent to VAT on his costs and expenses, even though the judgment creditor is not registered and therefore not liable to collect or account for VAT to the Treasury.

A number of questions arise. First, what if the enforcement agent is himself not registered for VAT? How does he account to the Treasury for a sum equivalent to VAT? Would he not just pocket it? What happens to that money? Secondly, when did the common law take cognisance of VAT? Perhaps the Minister will explain the meaning of Mr Cartlidge’s reference to the “common law position”? I find it difficult to comprehend why, if the judgment debtor would not have to pay VAT to the judgment creditor, the common law would force him to pay it to the tipstaff on behalf of the bailiff.

Section 90 of the Tribunals, Courts and Enforcement Act 2007 gives power to the Lord Chancellor if he “considers it necessary or expedient” to make

“supplementary, incidental or consequential provision”

or

“transitory, transitional or saving provision”

by regulations. In Schedule 12—on which this instrument also depends—paragraph 13(3) deals with taking control of goods, paragraph 42 with the sale of goods, and paragraphs 50(4) and 50(7) with the application of the proceeds. How is there power to make this instrument, which, in effect, imposes taxation upon the judgment debtor which he would not have to pay if the judgment creditor were registered for VAT? It is arbitrary; it is luck, a matter of chance.

The Minister will appreciate that if you have worked, as I have, as a solicitor in a close mining community in north Wales—not dissimilar to Tredegar, I may say—there is always concern about the activities of bailiffs and their tactics. I include in that claiming fees for visits to the debtor which were never made, or where the knock on the door was particularly soft and a second visit follows. Clients are not aware or made aware of their ability to go to court to tax the bills for their expenses, and these are not inconsiderable sums. If it is council tax, parking fines, or a debt under £1,500, for example, it is £75 for a letter, a £235 fixed fee for a visit to your home and a £110 fixed fee for taking and selling your possessions. Over £1,500, there is an extra fee of 7.5% on each of the latter two stages. A High Court judgment of under £1,500 attracts fixed fees of £190 for a visit, £495 for failing to keep to an enforcement agreement and £525 for taking and selling your belongings. If it is over £1,500, 7.5% is added to the enforcement and sale fees.

We are about to face a period of inflation, high interest rates and a rise in the cost of living. This will be familiar to those of us who are old enough but not to the youngsters raising their families. I hope somebody judicially reviews this instrument because I do not think it is properly made and I very much hope it will come back to haunt what is left of this Government.

[Lord Best (CB)]

My Lords, I support this Motion to Regret in the name of my noble friend Lady Meacher. The last thing needed by those trying to deal with a problem debt is an extra 20% charge on top of the collection costs in tax that should clearly have been levied on the creditors, not the debtors. It is surely a great injustice for debtors to have been charged VAT when they should not have been and to have to go to considerable lengths to recover money they have been falsely charged. It is certainly a matter of deep regret and the remedies proposed by my noble friend seem entirely justified.

Perhaps I could take this opportunity, on the subject of bailiffs, to note that there is considerable political and practitioner interest in bailiff reform. Will the Minister reaffirm the Government’s support for the enforcement conduct authority as organised by the Centre for Social Justice in partnership with both the bailiff sector and the debt advice sector? Impressive work has been done by the CSJ in securing agreement between those representing bailiffs and those providing debt advice, such as the charity StepChange. This now needs government to take matters forward and grant statutory powers to this new body to give it real teeth. Perhaps the Minister could comment.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I declare an interest. A close family member was supported by StepChange, and to say that its engagement and support were life-changing is an understatement.

This is an issue which has united parliamentarians from across both Houses and both sides of the House, as well as the advice sector. It is right that the matter is before us, and I thank the noble Baroness, Lady Meacher, for giving us the opportunity to consider it today. I also join her in thanking Just for its briefing and, probably more importantly, for its campaigning on this issue. As she rightly said, I am not sure we would be here today if Just had not taken it as far as it had.

As we have heard, enforcement officers have been incorrectly charging VAT to debtors since 2014. The Government, I think, agree that debtors should not be paying the VAT and Ministers have confirmed this at the Dispatch Box previously. When the matter was raised in Parliament by my noble friend Lord Stevenson of Balmacara in 2019, the noble Earl, Lord Courtown, said on behalf of the Treasury that

“any VAT due is payable by the creditor who receives the service. The debtor is not required to pay the VAT.”

As Parliamentary Answers go, that is quite unequivocal. That should have instigated an immediate reset of VAT charging at that point. It would have been nice if the MoJ had listened to the Treasury then.

The SI deals with the charging of VAT and ensures that, going forward, High Court enforcement officers—HCEOs—do not charge debtors. That is to be welcomed. The move should be to the creditors. Like the noble Baroness, Lady Meacher, we are concerned that the Government are not tackling the historic overcharging that has been taking place for at least the last seven years. The Government accept that debtors have been unfairly taxed, so can the Minister please explain why the Government are not committing to providing—as the noble Baroness, Lady Meacher, has outlined—tax refunds or other systems to resolve this mischarge to debtors? There is an established principle when someone has been financially wronged: we saw it regarding PPI and heard it in the news this morning in a recommendation from the ombudsman about incorrect benefits payments. Why are the Government taking this position?

There may well be another simple solution. I look for a response from the Minister to this. It could possibly be dealt with as an administration task. The MoJ could order debt enforcement companies to return the VAT to the debtors who had overpaid it. The debt enforcement companies which are VAT registered would then reinvoice the creditors to return this money to them. The creditors could submit this VAT as a cost to HMRC. This means it would not cost the debt enforcement companies or the creditors any money. It would be a return through the VAT system directly from HMRC. I look forward to the Minister’s response.