Bailiff charged you VAT? Challenge unlawful fees now

The bailiff charged VAT on his fees

Where a debtor has been charged Value Added Tax by a bailiff or enforcement agent, it is essential to consider whether the charging of VAT was lawful. The legal framework governing enforcement agents is rooted in section 63 of the Tribunals, Courts and Enforcement Act 2007, which unequivocally provides that an enforcement agent must be an individual, not a body corporate or partnership. It follows that no bailiff company or enforcement firm, whether incorporated or otherwise, may lawfully act as an enforcement agent in its own right. Only individuals, properly authorised under an enforcement certificate issued by the County Court, may undertake such duties.

When VAT may be lawfully charged

Turning to the question of VAT, section 3 of the Value Added Tax Act 1994 defines a taxable person for VAT purposes as someone who is, or is required to be, registered for VAT in the course of business. An individual enforcement agent may therefore charge VAT on their enforcement fees only where they are themselves VAT registered. The mere fact that a limited company employs or instructs such an agent does not entitle the company to recover VAT from the debtor. A limited company may be registered for VAT and may render services to the creditor, such as administrative support, but those services fall outside the scope of the enforcement fees recoverable from the debtor. As the courts have repeatedly recognised, the statutory scheme governing enforcement fees is exhaustive, and any attempt to extend it by private agreement or custom is impermissible.

Legal framework for disputing VAT charges

The relevant statutory instrument governing bailiffs’ fees is the Taking Control of Goods (Fees) Regulations 2014. Regulation 16 of those Regulations permits a debtor to apply to the County Court or High Court for an order that the amount of fees and disbursements charged by the enforcement agent be assessed. The procedure for doing so is provided for by Civil Procedure Rule 84.16, which allows a debtor to seek judicial scrutiny where there is a dispute over the level or legitimacy of enforcement fees. Where VAT has been charged without the enforcement agent being registered for VAT, this amounts to a misrepresentation of a tax liability and may justify a judicial determination that the fees have been improperly inflated.

How to apply for assessment

A debtor may apply to the court under CPR 84.16 using Form N244, supported by a witness statement detailing the amounts charged, the absence of a VAT registration for the individual enforcement agent, and any correspondence or documentation showing that VAT has been demanded. It is important that the debtor provides a screenshot or certificate search from the HMRC public register to demonstrate that the individual enforcement agent is not VAT registered. In the course of the assessment, the court may make an order requiring repayment of any improperly levied VAT and may also order costs in favour of the debtor pursuant to CPR 44.2. Where the debtor is represented, CPR 46.5 and Practice Direction 46 paragraph 3.1 provide for the court to make a summary assessment of costs payable to the receiving party.

Reporting suspected VAT fraud

There is a further public law dimension. Where a non-registered enforcement agent purports to charge VAT, this conduct may amount to VAT fraud. HMRC has published guidance and operates an online portal for reporting such misconduct. A report may be made via the HMRC online VAT fraud reporting tool or through their dedicated VAT fraud hotline on 0800 788 887. Any such report should be supported by documentary evidence showing the VAT demand and confirming the absence of the agent on the VAT register.

Claiming restitution through civil proceedings

In addition to judicial and administrative remedies, the debtor may pursue recovery through civil proceedings, such as a claim issued via Money Claim Online, where unlawful VAT has been collected. The debtor would plead that the charge constituted an unlawful demand for money, without statutory authority, and seek restitution of the sums paid. The cause of action may be framed in unjust enrichment or as a claim for money had and received.

Improper conduct by bailiff companies

Finally, where a limited company seeks to recover VAT from the debtor in circumstances where it did not itself undertake the enforcement activity and where the enforcement agent is not VAT registered, the company may have committed a regulatory breach and may be liable to HMRC for improper tax accounting. There is no contractual privity between the debtor and the company that would support recovery of VAT as input tax, since the enforcement services are rendered under statutory authority and not as part of a contract freely entered into. Any such practice, if deliberate, is likely to fall within the purview of HMRC’s criminal and civil enforcement powers.

Conclusion

The position, in summary, is that VAT may only lawfully be recovered from a debtor where the enforcement agent himself is registered for VAT and has properly accounted for that tax in accordance with the Value Added Tax Act 1994. Limited companies purporting to act as enforcement agents or seeking to collect VAT from debtors are acting outside the statutory framework and may be liable both to repay the debtor and to regulatory sanction. Debtors are entitled to seek judicial redress and to report unlawful conduct to the relevant tax authority. The law provides adequate mechanisms to challenge and redress such unlawful charges, and the court will take a dim view of any attempt to exploit the enforcement process for financial gain beyond the limits imposed by statute.