A change in practice on charging VAT on High Court Enforcement fees, payable under Writs of Control has come into practice recently
Ahead of new guidance from the UK Government, prompted by an ongoing court case, the High Court Enforcement Officers Association (HCEOA) is recommending a change in the treatment of VAT on High Court Enforcement fees.
This change is particularly relevant to cases where the judgment creditor is VAT registered.
How the VAT change will affect you:
If the judgment creditor can recover VAT from HMRC:
Where a judgment creditor is VAT registered, the HCEO will not recover VAT on their fees from the judgment debtor
- Instead, they will deduct a sum equivalent to the VAT element of their fees from the funds recovered from the judgment debtor and pay this to HMRC
- An invoice addressed to the judgment creditor marked ‘paid’ will be forwarded to the judgment creditor/their representative, along with the balance of funds they are due
- The judgment creditor can then claim this VAT from HMRC in the normal way
If the judgment creditor cannot recover VAT from HMRC:
- We will continue to collect a sum equivalent to the VAT from judgment debtors
- This sum will continue to be paid to HMRC
- In line with expected Government guidance, we will issue a VAT invoice to the judgment creditor
Moving forward, it is important for creditors to inform collections agencies whether they are VAT registered in order to ensure that they stay compliant with the new guidance.