Is Insolvency Action An Effective Method Of Collecting Council Tax?

(click here to read about the bankruptcy procedure)

From our experience, the simple answer to that question is a categoric ‘yes’ – writes Mark Hodges of Wellbeck Law.

Part VI of the Council Tax (Administration & Enforcement) Regulations 1992, Regulation 49(1) states:
Where a liability order has been made and the debtor against whom it was made is an individual, the amount due shall be deemed to be a debt for the purposes of section 267 of the Insolvency Act 1986 (grounds of creditor’s petition)

Accordingly and given the fact that bankruptcy forms part of the enforcement regulations, Local Authorities are encouraged by Parliament to use this tool in its enforcement armoury.
Nevertheless, the Local Government Ombudsman (“LGO”) has been critical of some Local Authorities whom it believes have acted irresponsibly in commencing insolvency proceedings, describing a small minority of councils as being guilty of “maladministration causing injustice”.

Although we ask our client councils to make full use of the information available to them to ensure that exhaustive checks are made prior to instructing our firm to commence bankruptcy proceedings, we believe that the LGO has been somewhat harsh in its findings in some cases.

Indeed, whilst the LGO acknowledges the fact that bankruptcy is a procedure allowed by statute and regulations, he apparently believes that the use of bankruptcy action should only be taken as a ‘last resort’. However, those same regulations do not seem to assert that a ‘last resort’ approach must apply at all.

We also find the comments of Lord Justice Robert Walker interesting in the matter of Griffin v Wakefield MDC in the Court of Appeal on 24th March 2000:

“I cannot accept that the use of a bankruptcy petition is inherently more draconian than committal to prison and is objectionable on that ground. There can be no objection to the use of a procedure which is permitted by statute and regulations. In this case, although the applicant undoubtedly thinks differently, I can see no reason for supposing that the use of bankruptcy against him was inspired by improper motives rather than a determination to try to collect the outstanding sum which it is the local authority’s duty to collect”

Nevertheless, the LGO’s findings have been well publicised and we would encourage all councils to ensure that they implement robust procedures to ensure that rigorous checks are made prior to the commencement of insolvency action.

We would also implore councils to take notice of the LGO’s decision in the case involving Thurrock Council which perhaps demonstrates the importance of being proactive and seeking specialist legal advice at an early stage.

As we have done with many of our Local Authority clients, we are happy to discuss the use of insolvency action as an effective recovery tool with you and assist in implementing procedures that should help alleviate the risk of criticism from external organisations such as the LGO.

Having worked with a number of councils throughout the Country, we fully understand the pressure placed on Local Authorities to maximise the collection of council tax and other charges and we are happy to work with you to help you meet the ever increasing burden of expectation placed on you by Central Government.

We are willing to provide you with a free demonstration of the services we can offer and if this is something of interest to you, please call Jeremy Boyle or Mark Hodges on 020 7467 3999.

You can also visit our website www.welbecklawllp.co.uk