Yvonne Fovargue MP: Bailiff regulation is so important

There are multiple problems affecting how the bailiff sector operates.
Makerfield MP Yvonne FovargueMakerfield MP Yvonne Fovargue
Makerfield MP Yvonne Fovargue

Regular readers of this column will recall how critical I have been in the past about some of their debt recovery tactics and how they treat people in debt.

Just over two years ago, I was approached by a group called Just, who campaign to ensure that all debts are collected ethically. They pointed out to me that enforcement officers in the High Court – bailiffs to you and me – were charging VAT on top of their fees to people in debt.

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I was shocked. My understanding, and the understanding of many others, was that VAT was only payable by the creditor – the person to whom the debt was owed and who had brought the court action - and then they could claim back the money from the taxman.

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By making the debtor liable for the VAT, an extra 20% was being put on top of debts and fees already owed.

Given that many people brought before the High Court are amongst the most vulnerable people in our society, this additional charge could have a devastating impact on their finances.

These are the people least able to pay and it was wholly wrong to expect them to take on this burden.

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Feeling that this must be an oversight or misapplication of the rules at best, I wrote to the Ministry of Justice to get an explanation.

How could they possibly justify charging VAT to the debtor, I asked, when it was clear they would be unable – unlike the creditor – to claim it back?

Eventually, I was informed that this was indeed a mistake. The bailiffs in the High Court had been incorrectly charging VAT on top of their fees to debtors as a result of a misinterpretation of the 2014 Taking Control of Goods Regulations, the minister said, when this should have been charged to creditors.

It had taken two years, but we had a result. Debtors would no longer have to pay this 20% charge.

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But wait a minute. What about the thousands of people who have been unfairly and incorrectly charged VAT on their debts since 2014?

Will they get a refund from the debt enforcement companies or from creditors, such as utility companies and the like?

The total amount mischarged is said to amount to £100 million. So far there has been no action and this is not good enough.

The Ministry of Justice and HM Revenue and Customs need to ensure not only that the guidance to firms about charging is completely clear, but also that any VAT on fees which has been wrongfully charged to and paid by debtors is refunded.

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Since a large proportion of these high court debt enforcement orders concern water suppliers and energy companies, I have written to the regulators in those sectors – Ofwat and Ofgem – calling on them to require firms to refund all customers wrongly charged VAT.

In the meantime, I would ask anyone who believes they have been wrongly been charged to write to the High Court Enforcement company that they paid, to reclaim the VAT.

Hopefully, all should end well and everyone who has been wrongly charged should get their money back. I will certainly do all I can to ensure that this is the case.

But above all, this case reminds me of why regulation of the bailiff is so important and so long overdue.

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The wrongful charging of debtors, whether wilful or not, is just one example of where the bailiff industry has got things wrong. There are many others.

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