In many cases bankruptcy action to enforce council tax is disproportionate. Bankruptcy results in debtors losing their homes Problem not size of debt but the ruinous costs of insolvency proceedings

18 January 2018

In many cases bankruptcy action by councils to enforce council tax is grossly disproportionate. 

The consequences of a ‘harder line’ on enforcement with council tax was revealed on the BBC current affairs programme, Inside Out (Monday, 15 January 2018. BBC1 London 7.30 pm) looking at the severe personal consequences for debtors ensnared in bankruptcy and charging order proceedings instigated by local authorities. Commenced under obscure provisions in the enforcement regulations (Regs. 49 and 50-51 of the Council Tax (Administration & Enforcement) Regulations 1992 SI 613) the results are homelessness, poverty and injustice for a growing number of taxpayers.

Property owners with equity are providing a too-tempting target in having valuable assets that can easily be realised. Whilst charging orders against homes are discretionary, as courts may restrict their application, bankruptcy almost invariably results in debtors losing their homes. The problem is not the size of the council tax debt but the ruinous costs clocked up in personal insolvency proceedings once the process begins.

Bankruptcy proceedings swiftly result in the level of alleged debt spiralling by the addition of fees charged by insolvency practitioners (often remote from the authorities they serve). When this stage is reached subsequent processes typically turn into an exercise aimed at recovering fees rather than settling actual tax liabilities, with no official in the petitioning authority prepared to put any brake on the process even when mistakes are revealed.

In many cases such action proves wholly disproportionate. Taxpayers are left representing themselves with no legal aid despite the high complexity of these proceedings. The process is also often fraught with errors which taxpayers struggle to challenge and once the process is underway.

A warning of the dangers inherent in proceedings was raised more than ten years ago by Registrar Simmonds at the High Court

“I am constrained to record that I (and my brother registrars) have been for some time and remain concerned by the particulars of debt relied upon in petitions by some local authorities. This case only heightens this concern. There are cases where pleaded liability orders are shown not to exist. In other cases they cannot be proved by the production of a sealed order or a statement from the clerk to the magistrates that an order has been made. No credit for payments are shown, thus the integrity of the debt upon which some local authorities’ petitions are based is in question. (London Borough of Lambeth v Simon [2007] BIPR 1629 June 6 2007 at paragraph 45)

A decade on this observation is more valid than ever. Help is virtually non-existent as the technicalities of these proceedings exceed the skill sets of anything available in the free legal advice sector in the UK, with no help available at all on free-legal advice basis anywhere in England and Wales once debtors reach the stage of their affairs being placed in the hands of a trustee in bankruptcy.

The ultimate social consequences bankruptcy proceedings cannot be underestimated. People lose homes, businesses and assets as bankruptcy charges can soon eat up the whole of an individual’s estate, and when the debtor is vulnerable and his/her dependents are left homeless as a result they may often have to be housed by the same authorities with long-term costs for the public purse. Cases of excessive council tax enforcement have been linked to suicides in some cases.

As the Inside Out programme showed these pernicious enforcement policies for council tax are in urgent need of scrutiny and reform.

Alan Murdie, LL.B Barrister, Council Tax Legal Services