VAT on Fees

[Willowbee]

...

VAT registered creditors

Where the instructing creditor (and not their solicitor or agent) is VAT registered, VAT should be charged to that creditor and no VAT should be charged to the debtor.

A VAT Invoice should be issued to the creditor and that VAT should be accounted for to HMRC in the usual way.

Non-VAT registered creditors

Where the instructing creditor is not VAT registered, the Association recommends that a sum equivalent to VAT should be charged to the debtor, as at present and in-line with the draft 2020 guidance issued by MoJ.

No VAT Invoice should be issued (to either debtor or creditor) and that sum, to be treated as VAT, should be accounted for to HMRC in the usual way.

[zeke]

So, where is all that VAT that has been taken for the last seven years by non-VAT registered bailiffs?

Where is that money now?

Will victims get their unlawfully taken VAT refunded?

I know these recent detailed assessments have thrown up a lot of questions, but in all but one case, the master agreed that bailiffs are not VAT registered, and even if they were, it doesn't place a liability on debtors to pay increased fees.

VAT registered bailiffs can reclaim the VAT charged to them by the bailiff company for providing them with enforcement work.

Thats how its always worked in any service industry that outsources its business.

[Syd Snitkin]

We have, for the last seven years, been seeking clarity from the UK Government in this area and will continue to do so

FFS, HMRC clarified in 2016 and the House of Lords clarified again in 2019, something which was acknowledged on the HCEOA website:

Debtors are not, therefore, charged VAT on High Court Enforcement Fees, but in some circumstances do pay the VAT charged to the Claimant. https://www.hceoa.org.uk/news/130-vat-o ... ement-fees

At best, HECOs have been ignoring this advice for 2 years, at worst, for 5 years. VAT should never have been charged on enforcement fees. How many times have we seen this happening, changing the £75 NOE into £90, the £190 first enforcement stage fee into £228, the second enforcement stage fee of £495 become £594?

VAT is only payable in respect of services set out in the relevant Sheriff’s Fees Order, at present this is the 2018 Order; this is not the fees set out in the Taking Control of Goods Fees Regulations 2014.

This should never have been happening, and was only argued to be the case from two sources, both of which you need no reminding of.

Mind you, it seems a little coincidental that this has been clarified following someone contacting the HCEOA and asking why their members are charging VAT.

[Willowbee]

This whole things seems to have be heralded by a new company called Just.

https://www.justdebt.co.uk/whats-being- ... the-debtor

[monkeynuts]

Where the instructing creditor is not VAT registered, the Association recommends that a sum equivalent to VAT should be charged to the debtor, as at present and in-line with the draft 2020 guidance issued by MoJ.

A sum equivalent to VAT should be charged to the debtor…. Errrrr not according to regs it’s shouldn’t.

Isn’t that just a “make your own fee up”

[Willowbee]

Agreed that seem like a stop gap until the full new guidance is handed down from the HMRC. It can only open themselves up to claims at a later date I'd imagine.

[Syd Snitkin]

This whole things seems to have be heralded by a new company called Just.

https://www.justdebt.co.uk/whats-being- ... the-debtor

I wonder if a certain grubby little blog will still continue to deny all of this, and still insist that debtors must pay VAT on the enforcement fees?

[Willowbee]

So, where is all that VAT that has been taken for the last seven years by non-VAT registered bailiffs?

Where is that money now?

I'm not sure that's relevant, the VAT was collected on behalf of the HCEO company and they are always VAT registered. The VAT collected was likely passed to the HMRC who would have willingly accepted it, despite the guidance casting doubt on it's legitimacy. That guidance has now been pretty much clarified by the HMRC and can be seen by the HCEOA's updated guidance it issued.

[monkeynuts]

Sadly Still won’t stop the process being abused.

[Syd Snitkin]

Oh dear oh dear - it seems the bailiff companies are finally catching on:

PLEASE NOTE | Changes to the way VAT is charged on the fees of High Court Enforcement Officers has recently changed.

Where the fees of HCEOs are quoted, the payment of the VAT on the fees is determined by whether the Judgment Creditor is registered for VAT. Going forward we will be checking the VAT status of the Judgment Creditor named on the Writ so we can work out if the Judgment Creditor must be invoiced for the VAT element of the fees directly.

If the Judgment Creditor is registered for VAT, a VAT invoice will be issued in the name of the Judgment Creditor and the VAT element of the High Court Enforcement Officers Fees will be deducted from all sums recovered. https://shergroup.com/post/what-is-high ... forcement/

It's still not quite right as they're implying they can still charge VAT on enforcement stage fees, but will determine the VAT status of the creditor before deciding who will pay them. As we all know, VAT is not to be charged on the fees under the 2014 regulations as they are not a service addressed to either party. Only the fees under the relevant Sheriff's Fees Order (currently the 2018 order) attract VAT as they are a service addressed to the creditor and paid upfront by the creditor. This VAT is recoverable - depending on the VAT status of the creditor, this will be recovered from either HMRC or the debtor.

So let's see if Mr Shifter will put down his brew and finally acknowledge who has been correct for all these years. I mean, he won't, but we can all see the truth.

[Syd Snitkin]

I wonder what their go-to John Kruse makes of it all?

[zeke]

Shergroup is still charging VAT as of yesterday. It went to detailed assessment, so I would rather go with that the high court master makes of it all.

[zeke]

Update, Shergroup lost its VAT argument in a remote hearing lasting five minutes. The debtor used the courier and taxi firm illustration in their witness statement. Hearing adjourned for costs.

[monkeynuts]

Case ref?

[zeke]

E0OWD111 is the claim number. Not sure of the ref - if there is one. I referred it to counsel.

[Syd Snitkin]

Is it tradition to serve custard with humble pie, or is it just too bitter to make a difference?

[Syd Snitkin]

The fees become his income and he is responsible for any tax calculated on that income.

No, they go to the company not the bailiff - and the tax calculated will be income or corporate tax. No-one pays VAT on their income.

High court enforcement officers proper cannot claim or charge VAT. As they are employed by the court .

No, they're employed by their companies. County Court bailiffs are employed by the court.

The VAT act says that if the business is registered has a turnover above the prescribed limit and that income for busines, they must pay VAT on their income,

That implies that if a small bailiff company doesn't turn over the prescribed amount, any VAT collected needs to be repaid to whoever paid it.

What they also fail to acknowledge is that HMRC clarified this years ago, stating that VAT was applicable to fees under the Sheriff's Fees Order, and if the creditor was VAT registered, they pay the VAT and reclaim it from HMRC. It's just that the bailiff companies, and certain advice sites, chose to ignore that message and once more the Government has been forced to legislate to bring the bailiffs into line. Nowhere, anywhere does it say that enforcement fees under the 2014 regulations are subject to VAT, only those under the Sheriffs's Fees Order (currently the 2018 version) so it will be interesting to see exactly what these amendments will say.

[zeke]

Pote, where are you getting those quotes from?

The VAT matter on fees is very old news.

Master Fontaine ruled against DCBL because the bailiff (enforcement agent) is not VAT registered

The debtor is not liable for DCBL's input tax because it is a company, not an enforcement agent.

The Sheriffs Fees order is nothing to do with Sch.12 and HCEO's are not 'employed' by the court. Like a solicitor, they are an officer of the court, but limited to enforcement matters.

[Syd Snitkin]

I'll give you one clue...

[Syd Snitkin]

I'll give you one clue...

download.jpg

[zeke]

He's not been taking his tablets.