County Court proceedings

Introduction

This page gives a basic explanation of County Court proceedings. A more detailed explanation is available in the Tax Advisers section of the site.

If the collector is unable to recover your tax by distraint or through the Magistrates' Court, he will probably seek a judgment in the County Court, which orders you to pay the amount due.

If you still fail to pay, the collector may ask the County Court to enforce its judgment or, occasionally, he will pass your file to the Revenue's Enforcement & Insolvency Service office to consider proceedings for bankruptcy.

The main disadvantage of a County Court judgment is that it will affect your credit record. On the 'plus' side, there is a procedure to ask the court to order the debt to be paid by instalments, and County Courts can be quite sympathetic in allowing time to pay.

Most County Court actions are conducted purely by paper work . It is unlikely that you will be required to attend a hearing.

There is no monetary limit on the amount that may be claimed by the Revenue in the County Court.

What happens first

You should receive a County Court claim which lists the amounts claimed by the Revenue together with court costs.

The claim is accompanied by a response pack , which contains three forms:

• Defence and counterclaim
• Acknowledgement of service
• Admission

The first two forms are needed if you wish to contest the claim, and the third form to ask for time to pay (see below).

If you do nothing

If you do not respond at all within 14 days from the service of the claim, the collector can ask the court to enter judgment against you. You will then receive a document from the court stating that a judgment has been given for the amount claimed by the Revenue, and that payment must be made 'immediately'.

In this situation and if you then do not pay, the Revenue can request an order to obtain information , which requires you to attend Court and provide evidence of your means (ability to pay). If you ignore this order you may be imprisoned.

Alternatively, if the Revenue can show that you have had the means to pay the judgement debt or any unpaid instalments under a judgement order, they may ask for a Judgement Summons to be issued. If the Judge accepts their evidence or you do not respond, this can also lead to imprisonment.
In both situations the prison sentence is given for 'contempt of court' (you have failed to comply with a Judge's order) and not for non-payment of tax.

In other situations if you do not pay an amount ordered under a judgement when it is due, the Revenue can return to the court for other methods of enforcing the order.

The court has various other powers, for example it may make:

• a third party debt (formally garnishee) order, requiring someone (such as a bank) who owes you money to pay this directly to the Revenue, or
• an attachment of earnings order, requiring your employer (if you have one) to deduct a certain amount from each salary or wage payment and send this to the Revenue.

In practice however if local court action is unsuccessful and the debt is more than £2000, the case will usually be referred to its Enforcement & Insolvency Service for consideration of bankruptcy proceedings

So you should never ignore a County Court claim.

Contesting the claim

If you think that the amount shown in the claim is wrong, you might feel encouraged to contest it in the County Court, using the Defence and the Acknowledgement of service forms contained in the response pack.

However, these are standard forms that are sent out by the County Court with claims for all kinds of debts, and the paper work does not tell you that it is very difficult to contest a claim by the Revenue successfully in the County Court. This is because Section 70 of the Taxes Management Act 1970 says that the certificates that will be produced by the Revenue, stating that tax has been charged and has not been paid, must be accepted by the court as sufficient evidence that the tax is due. So there is hardly ever any point in contesting the amount through the court.

If you do think that no tax is due or that the figures on the claim are wrong, it is more sensible to take the matter up with the Revenue directly . At the same time, ask the collector to delay asking the court to enter judgement. This can help to avoid the situation, for example, where the Revenue obtains a judgement and it is later agreed that there was actually no tax to pay.

If, having looked into your case, the Revenue accepts that there is nothing due, it should take no further action on the claim. If it accepts that there is just a small amount due, the collector may agree not to obtain a judgement if you can pay it fairly quickly.

Asking the court for time to pay

If you accept that you owe all or part of the amount claimed, and you do not have the means to pay it, then you are faced with the situation that the Revenue will want judgment entered against you.

However, you can avoid a judgment requiring payment 'immediately' - and the risks of further enforcement or bankruptcy described above - by asking the court to make the judgment debt payable over a period of time.

This is done by completing the Admission form that comes in the response pack. You give details of your financial situation and make an offer to pay

• (usually) a certain amount each month, or
• (less often) the full amount by a specified date in the future, based on what you believe you can afford.

After completing the Admission, you send it to the Revenue at the address shown on the claim. This must be done within 14 days of the date the claim was served on you .

The collector will review the form, and must then pass it on to the County Court. If the Revenue is not happy with the proposal you have made, it will advise the court of this, but it is for the court to decide the payments that will be ordered. And this will usually be done by the court staff without a hearing.

You will then receive a document from the court stating that a judgment has been given for the amount claimed by the Revenue, and how payment must be made. The court may well order payment in accordance with what you offered on the Admission form.

Once judgment has been given, you must make payment in accordance with it. If you do, the Revenue cannot take further enforcement action in relation to that debt. If you fail to do so, the Revenue can take further enforcement action (see 'If you do nothing' above).

Practical points on Admissions

Sometimes it is advisable to complete an Admission while, at the same time, asking the Revenue to re-examine the debt (see 'Contesting the claim' above). This is where you believe that just part of the tax claimed is due, and you cannot pay it immediately. It may take a while to agree the correct amount due and, if in the mean time the Revenue has obtained a judgment for the full amount claimed, the debt due under the judgment is then reduced to reflect the correct amount due.

In many cases County Courts order payments at a level previously rejected by the collector in negotiations. So it is always worth completing an Admission, if you want to pay by instalments, even if you cannot offer very much.

You should offer only what you can genuinely afford. If you offer more than you can manage, and the court makes an order for instalments at that level, and you then fail to meet the payments due, the Revenue can take further enforcement action (see 'If you do nothing' above).

Interest on tax

If the Revenue obtains a judgment, this will include interest on tax up to the date of the judgment.

The Revenue also reserves the right to claim interest, from the date of judgment up to the date of payment. This is not included in the judgment itself, but could be claimed in separate proceedings like any other tax debt.

If you cannot afford to make payments ordered under a judgment

The judgment may be given for payments which you cannot afford to make.

This may be, for example, because:

• you failed to respond to the claim and the Revenue has obtained a judgment for payment 'immediately', or
• the judgment requires payment by instalments at a level that you can no longer afford, perhaps because your income has fallen or you have become unemployed.

Whatever the reason, you may apply to the court for a variation of the order, to reflect what you can afford to pay. The procedure is very similar to that for an Admission, described above, although a different form is used.

Administration orders

If:

• a County Court judgment has been given against you, and
• you have other debts, and
• your total debts are no more than £5,000

you may apply for an Administration order .

Under such an order, all your debts are brought together in one place, and you make a single monthly payment to the court, set at a level that you can afford, which is then paid to your creditors in proportion to the debts that they are owed. The court keeps 10% to cover its costs.

Once an Administration order has been given, your creditors may not take separate legal action for recovery of any debt included within it, or approach you directly for payment.

Your credit record

When a judgment is entered in the County Court, details are included in the Register of County Court judgments, which is open for inspection by credit reference agencies and this will affect your ability to borrow money in the future.

When a debt due under a County Court judgment has been paid, you may apply to the Court for a certificate of satisfaction .

If the debt is fully paid within one month of judgment, the Court should ask for the judgment to be deleted from the Register of County Court judgments. If it is settled after more than one month, once a certificate of satisfaction has been issued, the word 'satisfied' should appear against the judgment on the Register.

Getting help

County Court claims, procedures and forms can be difficult and you may want to get help.

If there are problems relating to the amount of tax due, or negotiating with the Revenue, and you cannot afford to pay an accountant or tax adviser, you may contact Money Advice Direct

Finally...

The Enterprise Act 2002 comes into force on April 1st 2004 and elements of the section below have been updated to reflect this. Go to www.insolvency.gov.uk for the government-funded insolvency information service. Or the Bankruptcy Advisory Service is a good source of help and information. They can be contacted on 01482 633 035. They do make a small charge for their services.

If you owe the Revenue more than £2,000 - and the local collector has been unable to reach an agreement with you or to enforce payment - then your file may be passed to the Revenue's Enforcement Office for consideration of bankruptcy proceedings.

Commonly this will happen where you do not have enough assets for the Revenue to recover the tax by distraint, and it has obtained a County Court judgment on which you have failed to make payments that are due.

The Enforcement Office - which is based in Worthing , West Sussex - will try to persuade you to pay the tax very quickly. If this fails, it will consider starting bankruptcy proceedings.