Who should pay the VAT on High Court Enforcement Fees?
The High Court Enforcement Officer Association (HCEOA) urges "zero vat" on enforcement fees in response to Ministry of Justice consultation.
Every so often in this industry a question pops up that polarises opinion, and there is no greater example than with this one.
So, who should pay the VAT on High Court Enforcement Fees?
Well, moving forward, the answer is could be ‘no one!’
We’ve never liked sitting on the fence as a rule, but we’ve always been able to see both sides of the argument with this one.
We work closely with clients, claimants and debtors from all walks of life, every single day.
On the one hand, there has been the opinion that things should stay as they have been for some time now, with the responsibility for paying VAT belonging to the debtor and the debtor alone.
This has traditionally been the view of the High Court Enforcement Officers Association (HCEOA).
Since 2000, it has been down to High Court Enforcement Agents themselves, whichever firm they may be from, to legally and rightfully charge the debtor for VAT on recoverable fees...
...but a recent report by Just. found that the Government confirmed that VAT should be paid by the creditor...
In this interpretation, the creditor would have had to pay the VAT and then claim it back via normal business processes.
More paperwork and housekeeping for creditors and claimants perhaps, but this was the opinion shared by the country’s leading VAT barrister, Melanie Hall QC.
Both sides of the coin have always been understandable to us...
Heads – the debtor continues to pay, or...
Tails – the creditor pays and claims it back.
Well, neither side of the coin looks likely to win the toss as it happens.
Instead, the HCEOA have adjusted their stance, stating that the only fair way forward would be for zero VAT to be paid on all enforcement fees.
The HCEOA believe that zero VAT means:
· The Ministry of Justice’s objective for not charging VAT to debtors is met
· Fairness is shown to both creditors and debtors alike
· Unnecessary buerocracy is reduced
· Implementation is simple and practical
· Regulation from the Ministry of Justice is straightforward
It is worth mentioning at this point, that nothing is set in stone, just yet, and whilst the HCEOA have encouraged the Government to approve these suggestions, it has also laid down some requests, should the end result be that creditors are still asked to pay the VAT in future.
Highest on that list of requests is extra time to allow the industry to recover from the impact of COVID-19.
Our view remains unchanged, and it seems that sitting on the fence, as we have done on this topic, was the perfect place to be all along.
Zero VAT on enforcement fees, do you agree with HCEOA, is it the only way forward.
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