Wealden District Council (“the Council”) has a statutory duty to collect council tax and non-domestic rates (“business rates”). In order to carry out this duty central government has provided all collection authorities with a range of enforcement powers and remedies. This policy deals solely with those enforcement powers and remedies relating to insolvency proceedings and charging orders. What is meant by insolvency proceedings and charging orders is explained below. This policy also sets out the approach the Council will adopt when
considering the use of these particular powers and remedies.
Before enforcement action relating to non-payment of council tax and/or business rates can be considered the Council must have taken a number of preliminary steps including obtaining a ‘Liability Order’ from the Magistrates’ Court. Such an order sets out the amount due in respect of unpaid council tax and/or business rates and the Council’s costs in obtaining the order. For the purposes of this policy it is assumed that all necessary preliminary steps have been taken.
When considering the use of any enforcement power, the Council intends to act at all times in a reasonable and proportionate manner taking into account all relevant factors before deciding on the most appropriate course of action. The Council intends to adhere to this policy at all times except in those circumstances where, after consideration of all relevant matters, it considers it reasonable to deviate from it.
Nothing in this policy is to be taken as the giving of legal advice. You are at all times advised to seek your own independent legal advice in respect of any matter relating to or arising out of the non-payment of council tax and/or the non-payment of business rates.
When considering what enforcement action to take in respect of non payment of council tax the Council will consider the following factors (this list is not
- Detail of the debt (including amount outstanding, the period it covers and
the payment history)
- Age of debtor(s)
- Family details and health issues
- Whether the debtor(s) intends to move or refinance
- Whether the debtor(s) is a sole or joint home owner
- The number and date of any charges secured against the property to
which the council tax relates
- Whether any mortgage payments are up-to-date
- An equity calculation to assess how much (if any) is contained in the
- Any other relevant matter brought to the Council’s attention
The Council will consider each case on its own merits and then decide on the most appropriate course of action.
When considering what enforcement action to take in respect of non payment of business rates the Council will look at the following factors (this list is not exhaustive): –
- Details of the debt due (including amount outstanding and period it covers)
- Whether the liability to pay the business rates is with a company or an
- If an individual is liable the Council will also consider personal
circumstances including the debtor'(s’) age, family details and health
- An equity calculation looking at charges on the company’s or individual’s
assets and calculating, based on an estimation of the value of any assets
whether there is sufficient equity remaining to cover the sum due to the
Council including associated costs.
- Any other relevant matter brought to the Council’s attention.
The Council will consider each case on its own merits and then decide on the
most appropriate course of action.
The law relating to insolvency, both personal and corporate, is principally contained in the Insolvency Act 1986 (as amended) and the Insolvency Rules 1986.
Personal Insolvency – Bankruptcy
Bankruptcy is a court process by which a person (“a debtor”) is found to be unable to pay his/her debts and the purpose of this process is to ensure that any assets of value are shared fairly amongst their creditors. This is not debt recovery but rather proceedings brought in the wider public interest.
Bankruptcy proceedings can be taken against any debtor who:-
- Owes £750 or more
- The sum due is either payable immediately or at some certain future time
- This sum is unsecured (i.e. not covered by a charge over any of the
debtor’s property), and
- There is no reasonable prospect of the sum due being paid in a
The Council will usually consider pursuing Bankruptcy proceedings in cases where the cumulative debt exceeds £2,000 and there has been a history of non-payment and/or failed arrangements to pay. It will also have regard to the relevant factors set out above in paragraphs 2 & 3.
The Council will assess each case on its own merits and in certain circumstances it may proceed in respect of a debt of less than £2,000. By way of example only, where it appears to the Council that a person may be intending to avoid liability by relocating without providing an onward address and first settling the debt.
In cases where the Council has decided that it is appropriate to pursue Bankruptcy proceedings against an individual, it must first serve on that person a ‘Statutory Demand’. A Statutory Demand is a formal written demand served on the debtor for payment of the debt due.
A person receiving a Statutory Demand is advised to seek their own independent
legal advice as soon as possible because, when a Statutory Demand is served,
the recipient must either: –
- Apply to the court to have it set aside within 18 days of the demand being
served on them, after first giving the Council the opportunity to respond to
the request for the demand to be set aside.
- Pay the amount due in the statutory demand within 21 days after service
of the demand on them
- Inform the Council immediately that they are willing and able to offer
security for the debt due, or
- Inform the Council immediately that they are willing and able to compound
for the debt
All Statutory Demands served by the Council will be accompanied by a copy of the Insolvency Service’s booklet a “Guide to Bankruptcy”. As well as providing guidance on bankruptcy it also provides useful names and addresses of organisations to contact for help and advice.
If the debtor fails to do any of the above within the time limits set, the Council will consider presenting a petition to the appropriate county court for the debtor’s bankruptcy.
Bankruptcy proceedings are usually commenced by the Council presenting a Bankruptcy Petition in the county court for the area where the debtor lives or trades. The Bankruptcy Petition states the amount owed and is ordinarily presented on the basis that the debtor has failed to comply with the Statutory Demand.
The Council must then serve the Bankruptcy Petition on the debtor. Endorsed on the petition will be a date on which the court will consider whether or not to make a Bankruptcy Order.
If a Bankruptcy Order is made the Official Receiver (a government department) will initially take control of all the debtor’s assets. The Official Receiver will either supervise the sale and distribution of all the debtor’s assets or an insolvency practitioner may be appointed. A bankruptcy order is usually discharged after one year though there are certain circumstances where this period can be either shortened or extended and in addition various additional restrictions may be placed on a bankrupt by the court.
Further details of the nature and effect of a bankruptcy order can be found on the
Insolvency Service website
Corporate Insolvency – liquidation (winding-up)
Where a company is liable for business rates and has failed to pay those rates, the Council can, in appropriate circumstances, apply to the court to wind-up the company. This is known as ‘compulsory winding-up’ which is a formal court process and again involves the Official Receiver who takes control of the company’s assets if the court orders that the company is to be wound up.
Circumstances may arise whereby a company is liable to pay council tax, however, this is likely to occur very rarely.
It is important to note that it is a criminal offence for directors of a company to continue trading where they know or ought to have known that that there is no reasonable prospect that the company would avoid insolvent liquidation.
The Council will usually consider pursuing compulsory winding-up in cases where the cumulative debt exceeds £2,000 and there has been a history of non-payment and/or failed arrangements to pay. It will also have regard to the relevant factors set out above in paragraph 3.
The Council will assess each case on its own merits and in certain circumstances it may proceed in respect of a debt of less than £2,000. By way of example only, where it appears to the Council that a company may be intending to avoid liability by moving assets to a different company.
As in the case of personal insolvency the Council will commence legal proceedings via service of a statutory demand. Again the Council can only serve a statutory demand when the amount due is over £750 and 21 days from the date of service the company has neither paid the sum due or secured or compounded it to the reasonable satisfaction of the Council.
If the statutory demand remains unsatisfied the Council will consider presenting a petition to the court for winding up the company. This petition as well as being served on the company is also advertised in the London Gazette.
At the hearing of the Council’s petition the court has the discretion to dismiss, adjourn or make the winding up order. If the Council has satisfied all the evidential and legal requirements it is likely that the winding-up order will be granted. The Official Receiver will then deal with the legal requirements to wind up the company and distribute its assets to its creditors.
The law relating to Charging Orders is principally found in the Charging Orders Act 1975 and the rules and regulations made for the purposes of administrating and enforcing the collection of council tax.
A charging order is a charge placed upon the property in respect of which the council tax is due. This enforcement action is only available for recovering council tax and not business rates.
The Council will assess each case on its own merits and will consider issuing proceedings for a Charging Order in cases where the cumulative debt exceeds £1,000 and there has been a history of non-payment and/or failed arrangements to pay. It will also have regard to the relevant factors set out above in paragraph 2.
The Council may apply for a charging order in the following circumstances: –
- The debt outstanding for council tax is over £1,000
- The debtor is sole or joint home owner
After a liability order has been obtained by the Council for non payment of council tax and remains unpaid applying for a charging order is a 2 stage process.
Firstly, the Council apply for an interim charging order. This is considered by the court without a hearing. If an application is approved the court will set a hearing date for a final charging order and provide the Council with an interim charging order to serve on the debtor(s) and all interested parties at least 21 days before the hearing of the final charging order. The Council will also apply to the appropriate authority to register the interim charging order (if the land is
registered this will be the Land Registry, and if the land is unregistered this will be registered on the local land charges register).
If a party objects to the making of the final charging order they must file at court and serve on the Council written notice of their objections no less than 7 days before the hearing. The judge at the final charging order hearing will then make a decision whether to make the final order or not.
If the charging order is made final then the charge can remain on the property until the property is either re-financed, repossessed or sold. At which point the charge can be paid off from any surplus proceeds of sale or in the refinancing process.
In special circumstances the Council can apply for a court order enforcing the sale of the property. This is the second stage of the charging order process. This is only likely to happen where there is a substantial sum due and there does not appear to be a real prospect that it will be paid off.
Prior to the Council’s Legal Service being instructed the Enforcement Officer will complete a case review form and obtain approval from the appropriate manager. The form is attached at Appendix 1 and explains how the decision to use bankruptcy/charging order has been arrived at.
The decision to take enforcement action against an individual or a company is not a decision that the Council takes lightly. This procedure will be reviewed on an annual basis in order to ensure it remains valid, effective and relevant.