Havant Borough Council > Business > Business Rates > What if the business rate is not paid or the rate payer becomes insolvent?

If an amount for which a further notice or reminder notice has been served remains unpaid the billing authority may make a complaint to a Justice of the Peace. The complaint must be made within six years of an amount becoming due and the complaint will result in a summons being issued for the ratepayer to appear at a hearing. The cost of making the complaint and issuing the summons may be charged to the liable person.

A Justices' Clerk is authorised to consider a complaint and issue a summons. The signing of the summons by facsimile or rubber stamp was confirmed by the High Court and although billing authorities print the summonses for the Justices, it is the Justices who issue the summons, not the billing authority. A summons must be served at least 14 days before the hearing and the summons must state the time and date of the hearing. The Local Government Act 1992 does not specify the form of a summons and it is generally accepted that the standard form for civil procedures is adequate.

A summons may be served on a person by:

Hand delivering it to him
Leaving it at his usual or last known place of abode, or in the case of a company, at its registered office
Sending it by post to him at his usual or last known place of abode, or in the case of a company, to its registered office, or
Where it relates to a business, by leaving it at, or sending it by post to him at his place of business
Leaving it at, or by sending it by post to him at, an address given by the person as an address at which service of the summons will be accepted

If the business rate and costs are paid before the hearing date then the hearing need not proceed. If a person fails to attend the hearing the certificate of posting can be entered into evidence as service of the summons. The billing authority is required to submit evidence of the proof of liability and the ratepayer may submit evidence in defence against the issue of a liability order. Regulations provide for computerised records to be admissible as evidence. Regulations also state that appeals regarding the valuation of a property or its inclusion in the local rating list may not be raised at the hearing of a summons.

The authorised person attending for the billing authority will give evidence of proof of liability on oath that:

The business rate poundage has been made and published
An entry for the property appears in the local rating list
A demand notice has been served
A further notice or reminder notice has been served
The amount became due less than six years ago
A summons has been served under the specific rules
The sum claimed, including costs, has not been paid

It is a matter for the Court to determine what is a valid defence but it is likely to include where one or more of the matters listed in 'proof of liability' are incorrect or insolvency proceedings have been commenced regarding the ratepayer.

Regulations state that "The court shall make the order if it is satisfied that the sum has become payable by the defendant and has not been paid". The order is made in respect of the sum payable and the costs reasonably incurred by the applicant in obtaining the order.

Where the business rates are paid before the hearing date but the costs are not then the court shall, if requested by the billing authority, make the order in respect of the costs alone. The issuing of the liability order then enables the billing authority to use a number of enforcement options in order to settle the debt. An appeal against the issuing or non-issuing of a liability order is by a request for a case to be stated for the opinion of the High Court.

Additional costs are awarded by the Court for the issuing of the liability order but the regulations do not specify the scale of those costs. The scale is usually subject to regional discussions between representatives of billing authorities and justices clerks and when agreed are applied uniformly across the region.

The issuing of a liability order to a billing authority empowers the authority to obtain relevant information about the ratepayer and undertake enforcement by:

A liability order may be referred to a bailiff for collection. The bailiff has the legal power to take away a debtor's possessions and sell them in order to pay off the debt. The process is known as Distress. The bailiff is entitled to charge costs and fees for the activities performed and some, for instance the hiring of a van to remove goods, can be expensive.

Where the outstanding debt is above prescribed limits and is covered by a liability order the billing authority can apply for the ratepayer to be declared insolvent. Different arrangements and consequences apply to personal insolvency (bankruptcy) and corporate insolvency (liquidation) and those arrangements and consequences are specialist matters. However part of the process includes the option for all parties to agree a voluntary arrangement for the person or company to make payments to their creditors and avoid the formal proceedings.

Only business rate debts incurred as at the time of the insolvency are included in the insolvency. Further liabilities that accrue after the insolvency are subject to the normal business rate processes.

The only assumption the legislation makes regarding payment arrangements is that on receipt of a demand notice a ratepayer will pay by one or more monthly instalments. However, a billing authority can agree a payment arrangement with a ratepayer in certain circumstances and any ratepayer having financial difficulties should contact the rates section.

Where other enforcement options have been unsuccessful the billing authority may make an application to the Magistrates Court for the commitment to prison of a ratepayer who is an individual. The Court will summons the person to a hearing to enquire as to his financial means. This is often referred to as the 'means enquiry hearing'.

The Court has the power to remit the debt, impose a term of imprisonment of up to 90 days with immediate effect, or impose a term and suspend the commitment pending the ratepayer complying with a payment arrangement imposed by the court. The Council will apply for additional costs. If the person fails to appear, a warrant will be issued for their arrest and if he fails to abide by the payment arrangement imposed by the Court the billing authority may request that he be summonsed again to appear in front of the Court. At such a hearing the Court has the same powers as at the original hearing.

20 Recovery and Enforcement