Taking Control of Goods (Fees) (Amendment) Regulations 2021
The Parliamentary Under-Secretary of State for Justice (James Cartlidge)
My noble Friend the Parliamentary Under-Secretary of State for Justice (Lord Wolfson of Tredegar) has made the following written statement.
“I have today laid before Parliament the statutory instrument, the Taking Control of Goods (Fees) (Amendment) Regulations 2021. This instrument clarifies the circumstances where a cost equivalent to the VAT incurred on fees may be recovered from a judgment debtor.
The Taking Control of Goods (Fees) Regulations 2014 (“the fees regulations”) set out the fees and disbursements that enforcement agents may recover from judgment debtors when enforcing. debts. The regulations were designed to provide fairness, clarity and transparency to allow judgment debtors to check that they had been charged the correct fees.
In March 2020, the Ministry of Justice consulted interested parties about draft guidance on the recovery of VAT on High Court enforcement fees. This set out that, while the judgment creditor is liable for any VAT due, a sum equivalent to the VAT costs may be collected from the judgment debtor where it is correctly a cost of enforcement because the creditor cannot recover it from HMRC.
On 13 October 2021, I issued a final version of that guidance to the High Court Enforcement Officers Association. In response to feedback about the draft, the guidance restricts the recovery of a sum equivalent to VAT from the debtor to cases where a creditor is not VAT registered. This is intended to make it as clear as possible about when the debtor may be asked to pay those costs.
Concern has been raised by some parliamentarians and interested parties about whether the law allows a sum equivalent to VAT costs to be recovered from judgment debtors in cases when it would represent a cost to the creditor and whether it is fair to do so.
While we take the view that the taking control of goods legislation when considered together with the common law position permits the recovery of VAT costs from debtors in this way, we have accepted, however, that this is an area where it would be beneficial to set out the position in regulations to put the matter beyond doubt.
This instrument, therefore, amends the fees regulations to clarify that a cost equivalent to the VAT incurred on enforcement agent fees and disbursements may be recovered from a judgment debtor if the judgment creditor is not VAT registered.
We consider that this instrument strikes the right balance between seeking to ensure that as far as practicable creditors are not left out of pocket as a result of enforcement and that debtors are not over-charged.”
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