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Arnie Layne
Posted on 6 May 2016 11:21 am

Billing authorities typically recharge a standard sum in all cases, often in respect of both summonsing the taxpayer and the liability order application which is not in accordance with the two stage approach outlined in the Regulations (SI 1992/613). Also, by applying the same sum in all cases, the situation arises where a taxpayer who simply settles his debt on receiving a demand (summons) subsidises the costs of another taxpayer who engages with staff, for example to renegotiate payment plans, and the subsequent expenditure attributed to monitoring the arrangement.

In R (Nicolson) v Tottenham Magistrates, however, Andrews J gave guidance in a bid to clarify the grey area surrounding the Council electing;

i) to charge a standard sum in all cases; and
ii) not to apply a lesser sum for instituting the complaint than the costs for proceeding to court and obtaining the liability order.

Paragraph 46 of the judgment, with regard to a standard sum, states, so far as is relevant as follows:

"46. In principle, therefore, provided that the right types of costs and expenses are taken into account, and provided that due consideration is given to the dangers of double-counting, or of artificial inflation of costs, it may be a legitimate approach for a local authority to calculate and aggregate the relevant costs it has incurred in the previous year, and divide that up by the previous (or anticipated) number of summonses over twelve months so as to provide an average figure which could be levied across the board in "standard cases..."

Paragraph 50 of the judgment, with regard to not applying a lesser sum for instituting the complaint etc., states as follows:

"50. In principle there is no reason why a local authority should not decide to limit the costs it claims to the costs in connection with issuing the summons, although in practical terms that approach provides no incentive to the respondent to pay up after the summons is issued. What matters is that the costs that it does decide to claim are properly referable to the enforcement process."

The judge's opinion at para 46 is that it may be a legitimate approach to apply a standard sum in all cases. However, if wanting to take that approach (and do so lawfully) the standard sum would also have to be properly referable to the Regulations (regs 34 and 35). If there is any doubt as to what these regulations provide clarification has been provided in the Council Tax Practice Note 9: Recovery and Enforcement, produced by the Department of the Environment (1993) and more recently in the 2013 Government good practice guide, for the collection of Council Tax arrears, which both state that:

"the amount claimed by way of costs in any individual case is no more than that reasonably incurred by the authority"

In that case, given that the amount claimed by way of costs in any individual case must be no more than that reasonably incurred by the billing authority, if the Council wanted to take advantage of streamlining the administration process by applying a standard sum in all cases, in order for it to be done lawfully, it would need to forfeit each element of expenditure it incurs that is not common to every application (the majority of costs which are accounted for in its breakdown).

In other words, a standard sum could not exceed that incurred by the authority in a case where the least expenditure is attributed, which would in practice relate to a taxpayer settling his outstanding debt on receipt of a summons without contacting the council on any issue. Deriving a figure therefore from what the billing authority might consider its "Gross Recoverable costs" which is split between an estimated number of summons, can not be in accordance with the Statutory Instrument (SI 1992/613); even less so if the number of summons is reduced to factor in an estimate for those withdrawn, waived and those in respect of unrecoverable costs.

The least cost case is the only basis on which to determine a standard sum if the aim is to eliminate the administrative burden of calculating the costs in each case, whilst at the same time complying with the regulations which require that the costs be no more than that incurred by the authority in any individual case.

Councils typically set their standard costs at a level to ensure that no cost of recovery is borne by the taxpayer, a priority it seems over complying with the Regulations that restrict the amount that can be recharged in costs to the court application. It is therefore more likely than not that an element of the standard costs can not be compliant with the Regulations, based as they are on the premise that any expenditure considered attributable to recovery and enforcement activity (however tenuously linked) is recoverable by recharging it to the defendants through costs claimed in an application for a Liability Order.

The breakdowns of costs which many Councils now undertake to keep under review provide evidence that in the circumstances relating to a taxpayer simply settling their debt on receiving a summons, the vast majority of expenditure claimed is not incurred for the issue of a summons so the claimed costs represent a sum outside that which the law provides.


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