I was prompted to write this article by the welcome news that Her Majesty's Revenue & Customs are now naming and shaming companies and people who owe tax.

Guest article by Leslie M Wise FCA, Chartered Accountant and Barrister-at-Law, Wise & Co Debt Collection

"It seems such a simple idea" I hear creditors saying. "Why can't we do that?"

Well, you can. And you can't.

Administration of Justice Act

The answer lies in Section 40 of the Administration of Justice Act 1970. Before that Act, debt collecting could be a rough and unscrupulous game.

Yellow vans with "Debt Collection" could be seen outside premises, debt collectors would visit loudly and very publicly, and many will remember that even the utilities companies used to send bills to late payers with "Final Notice” in red on the envelope. All that stopped and S.40 gave a measure of protection to the debtor.

S.40 of the Administration of Justice Act 1970 (so far as it is relevant to this article) provides that a person in England and Wales commits an offence if, with the object of coercing another person to pay money claimed from the other as a debt due under contract, he -

(a) harasses the other with demands for payment which by their frequency, or the manner or occasion of their making, or any accompanying threat or publicity are calculated to subject him or his family or household to alarm, distress, or humiliation;

This does not apply to anything done by a person which is reasonable (and otherwise permissible in law) for the purpose -

  1. of securing the discharge of an obligation due, or believed by him to be due, to himself or to persons for whom he acts, or protecting himself or them from future loss; or
  2. of the enforcement of any liability by legal process.

There is no list of barred practices but The Office of Fair Trading (OFT) has produced "Debt Collection and Debt Management Guidelines" which sets out the types of debt collection practices which the OFT considers to be unfair.

The guidelines apply not only to routine debt collection but are applicable to all accounts where payments have been missed, or are in arrears. They do not actually  spell out  what is objectionable or, for example,  the types/times of when contact should occur, but there is a list of examples which it might consider unfair: repeatedly calling at unsociable hours, calling places of work, or calling on neighbours and disclosing the reason they are making these enquiries.

So how does HMRC get away with it?

The answer is above, but it is a hundred to one that you missed it.

Read the first words of Section 40 again. Carefully. You missed it again? The section applies ONLY to a debt due under a contract. That excludes taxes, for a start. They are due by operation of law, not under a contract.

But here is the useful bit - when you, the creditor, manage to get judgment, it is no longer a debt under a contract. It is promoted to a debt due by operation of law.

So section 40 does not apply.

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