Non-payment of business rates could end in a 90-day prison sentence for company owners
With the maximum punishment for non-payment of business rates set at 90 days? imprisonment, it’s crucial for company owners to stay on top of what they owe. Here, business rates advisor Mark Allen guides owners through what may happen if they’re unable to pay debts.
If your council should apply for and obtain a liability order due to non-payment of business rates, your business should receive a letter of enforcement before a visit from a bailiff.
The bailiff who visits your small firm could be self-employed, or can also often be working on a commission basis. Their employer could have many cases, and bailiffs will often pursue larger debts first, or debts believed may be paid quickly.
Larger debts can pay more in commission to bailiffs, while certain premises are easier to enter to levy goods for future sale. Bailiffs are regulated, follow guidelines and are responsible to creditors, which in this case is the council that has appointed them to recover business rate debt.
The council will pass information on the debtor organisation to an enforcement company once a liability order has been obtained.
The council is then responsible for instructing the enforcement agency that the bailiff works for. The bailiff must act proportionately, and take into account a debtor’s circumstances.
Business rate advice can be difficult to obtain at short notice, however there are companies and individuals that specialise in helping firms in such situations. It often falls on the debtor to make the bailiff aware of their specific circumstances and any issues surrounding non-payment, if the council has not already done so.
The process begins with a letter of enforcement notice from a bailiff demanding payment within a certain time frame. It is expected that the debtor then contacts the bailiff via the details on the letter to arrange payment of money due.
There will be a fee for the letter added to the overall debt. At this point, the debtor could approach the bailiff for a payment plan, however payment may still be demanded in full. If you are unsuccessful in negotiations with the bailiff, or are unable to pay the debt off in full, the bailiff will return to levy any goods or assets your business possesses.
To carry out a levy, a bailiff has to enter a firm’s premises and list any goods of value to remove in order to sell usually at an auction to recover the debt. If a bailiff physically enters the property and finds assets that can be sold, they will either be able to take control of those goods or give you another chance to pay carrying out the levy.
However, at this stage, business owners will have incurred further costs for the visits, as well as the levy. Fees are then added to the overall debt and will be taken first from any profit of the sale of the controlled goods. At this point you may be able to negotiate a controlled goods agreement to pay the debt before goods are taken and sold.
Bailiffs can only take goods belonging to a business if it’s a limited company. If a company is privately owned, the bailiff may expand their search for assets to the owner’s belongings. They can also visit the owner’s home, and if they enter they can levy suitable assets.
Once the levying process is complete, a bailiff can take control of goods and remove them ready for sale. If they cannot remove goods once the levy has taken place they can use appropriate force, via a notice, to re-enter premises. The cost of removing goods and storage are again passed onto the debtor, and money outstanding will increase accordingly.
If the goods taken do not sell and the bailiff cannot find enough assets to recover the debt, or cannot gain entry to levy, they may take goods from a public highway a car or other vehicle, for example.
If a bailiff clamps your vehicle they must give you a notice of immobilisation, and they can also apply for a court warrant for permission to visit other premises where they believe goods are stored.
Now the council may believe the debt is worth pursuing, or they may write it off. If they make a decision to still pursue the debt, with a bailiff having been unsuccessful, business owners will receive a warning letter and the council may take county court action, obtaining a county court judgement.
The council may then decide to call for bankruptcy proceedings, whereby owners will receive a statuary demand. If debts are still not payed at this point, the council can go back to the courts, and non-payment could be seen as a wilful act and culpable neglect. Non-payment of business rates can end up in imprisonment, with a sentence of 90 days for each liability order issued.
Councils need to regain debts that are legitimately owed, but it is not always a worthwhile endeavour if the company or individual concerned does not have access to funds.
Bailiffs are often caught up in the process, and are seen as convenient avenues by which money owed can be acquired. Debtors may be expected to gain a short term loan, for example, to pay their debts.
For business owners who find themselves in this uncomfortable situation, often not by choice, business rate advisors can help.
Mark Allen Meng, PGCE. Operations.
What were the changes to business rates rules made in the Queen’s Speech this year that could impact your firm? Read on to find out.
