Over the last couple of years, the High Court Enforcement Officers Association has been in ongoing discussions with the Ministry of Justice to clarify the correct position of how VAT on fees should be charged by High Court Enforcement Officers or their firm. This week, the Ministry of Justice has published final guidance on the position that has been agreed with HMRC.
According to the normal HMRC rules, VAT must be applied to debt collection services carried out by High Court Enforcement Officers.
The newly published guidance clarifies both when VAT charged to judgment creditors but which is correctly part of the costs of enforcement will be collected from judgment debtors and, alternatively, when and how VAT will be collected from judgment creditors.
This new guidance has implications on fees of High Court Enforcement Officers who are VAT registered in the following instances:
- If the judgment creditor is eligible to reclaim the VAT
- If the judgment creditor cannot recover VAT from HMRC
- In circumstances where the judgment creditor can recover some but not all of the VAT
- In circumstances where debts are consolidated
In instances where a High Court Enforcement Officer (or their firm) is not VAT-registered, VAT cannot be charged on their fees and a VAT invoice must not be issued. VAT may be charged by the suppliers of services treated as disbursements.
The impact of VAT on disbursements payable by a judgment debtor affects the judgment creditor, who will be liable for VAT costs, should they not be VAT-registered.
It is the duty of the High Court Enforcement Officer to clearly notify the judgment debtor of any VAT charges, if applicable, in any communications.
Read the full guidance here.
Your main contact:
Jonathan is Managing Director of Enforcement Services which he leads from our Central London offices.