Part 1 (Open to the public)
ITEM NO.10
REPORT OF THE LEAD MEMBER FOR STRATEGIC DIRECTOR OF CUSTOMER
AND SUPPORT SERVICES
TO THE LEAD MEMBER FOR CUSTOMER AND SUPPORT SERVICES
ON Monday ,5th March, 2007
TITLE : Council Tax Write-off Arrangements
RECOMMENDATIONS :
Members are requested to approve the write-off of the irrecoverable debts mentioned
in the attached report
EXECUTIVE SUMMARY :
The report provides details of the levels of council tax arrears within the city and
proposes immediate action be taken to utilise the bad debt provision to write-off
irrecoverable liabilities of £928,901
BACKGROUND DOCUMENTS :
(Available for public inspection)
Council Tax Write-off Strategy 2007
ASSESSMENT OF RISK:
The write-off of irrecoverable debts is an essential part of the administration of
accounts
SOURCE OF FUNDING:
The bad debt provision
COMMENTS OF THE STRATEGIC DIRECTOR OF CUSTOMER AND SUPPORT
SERVICES (or his representative):
1. LEGAL IMPLICATIONS
Provided by :None
2. FINANCIAL IMPLICATIONS
the bad debt provision has been comfirmed
Provided by :The level of
3. ICT STEERING GROUP IMPLICATIONS
Provided by:N/A
PROPERTY (if applicable):
1
N/A
HUMAN RESOURCES (if applicable):
N/A
CONTACT OFFICER :
Stephen Fryer
KEY DECISION:
N/A
WARD(S) TO WHICH REPORT RELATE(S):
ALL WARDS
KEY COUNCIL POLICIES:
Best Value; Performance Management;
DETAILS
The write-off of irrecoverable debt may affect properties in any Ward
1. Background
1.1 In recent years, significant improvements have been made in ensuring
irrecoverable council tax liabilities are written off in a timely manner to enable
Salford Direct’s recovery resources to concentrate on tackling live debt collection
issues. Members will recall that the District Auditor has recommended the use of
timely write-offs of irrecoverable debts.
1.2 Below are details of the level of outstanding debts as at 31st March 2006.
Year
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
Total
Amount outstanding
at 31st March 2006
£
5,912.49
11,531.93
12,194.67
12,941.22
39,100.90
24,823.51
654,051.29
1,148,539.70
1,179,285.82
1,571,529.53
2,301,406.55
4,333,216.26
10,162,586.30
21,457,120.17
2
2. Actions required
2.1 At Appendix 1, Members will find details of council tax liabilities to the value of
£98k, where it is considered that the debt is irrecoverable. Debts written off generally
fall into one of the following categories and in all cases have reached a stage where
despite extensive effort to collect these monies, the amounts remain unpaid.
1. Cases where the council tax payer is deceased
2. Cases where the council tax payer has been declared insolvent
3. Cases where the liability is deemed to be statute barred as the recovery
action through the Magistrates Courts has not commenced within 6 years of
the liability being raised (these are mainly adjustments to benefit entitlements
which result in a re-debit to the council tax account for earlier years)
4. Cases where the debtor has absconded and cannot be traced. Each case has
passed through our tracing service, an on-line service linking council tax and
benefit records across Greater Manchester, in an attempt to establish a
current address for the debtor. Cases where this process fails to produce a
successful trace are put forward for write-off.
5. Cases where the amount outstanding is less than £100 and it is considered
uneconomical to take recovery action.
2.2 At Appendix 2, Members will find details of irrecoverable council tax liabilities to
the value of £830k that relate to balances on accounts for the years from 1993/4 to
2000/1. The age of these debts make them increasingly difficult to collect and this
uses up significant recovery resources. The write-off of these debts will allow greater
focus of recovery resources on more recent year’s debts and will help to improve
collection rates on those later years.
2.3 The write-off of these debts has been provided for in terms of bad debt provision
and if agreed would be a major step towards quickly removing irrecoverable debts
from the accounts.
3. Recommendation
Members are requested to approve the write-off of irrecoverable council tax liabilities
amounting to £928,901, highlighted in Appendices 1 & 2.
Alan Westwood
Strategic Director of Customer and Support Services
3
Appendix 1
Analysis of cases for Write-off
YEAR / CATEGORY
2000/1 to 2006/7
DECEASED
£32,071
ABSCONDED
£66,176
Appendix 2
Analysis of cases for Write-off
YEAR
1993/4
1994/5
1995/6
1996/7
1997/8
1998/9
1999/0
2000/1
AMOUNT
£
8,723
13,593
16,034
15,106
37,776
30,940
623,185
85,297
TOTAL
£830,654
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TOTAL
£98,247
Write-off Strategy - Council Tax 2007
Objectives:
The objective of this policy is to ensure that all reasonable steps are taken to recover any
outstanding Council Tax before it is considered for write-off.
An outstanding debt can be considered for write-off if it falls into any of the categories listed
below
 Absconded
 Deceased
 Bankruptcy
 Liquidation
 Ceased to trade
 Receivership & Administration
 Statute barred
 Individual Voluntary arrangement and Company Voluntary arrangements
 Remitted by the Magistrates Court
Method of recovering Council Tax
A bill is issued at the start of each financial year and in most cases the chargepayer would
elect to pay by monthly instalments although other options are available i.e. weekly,
fortnightly, half yearly or in a lump sum.
Reminder notices are generated for those chargepayers who fall behind with their
instalments and these show the amounts they need to pay to bring their payments up to
date. If they fail to bring their payments up to date within the timescale allowed the full
amount becomes due and if this is not paid, a summons would be issued in the Magistrates
Court for any balance outstanding.
If the chargepayer brings their payments up to date but defaults again a second reminder will
be issued. Again failure to bring payments up to date will result in a summons being issued.
Following the issue of a summons if the chargepayer does not pay in full before the court
hearing date the authority will make an application for a Liability Order together with costs.
Once the local authority has obtained a Liability Order this gives them various options to
recover the debt
 Arrangements – can be made with chargepayers for payments to be made to clear
the outstanding debt.
 Bailiff Action - The local authority can forward the details of the debt to one of three
external bailiff companies for collection. The chargepayer would be responsible for
any charges made by the bailiffs in respect of the debt.
 Attachment of earnings – where the chargepayers employment details are known.
 Attachment of benefits – where the chargepayer continues to be in receipt of state
benefits.
 A charge on property – where the chargepayer owns the property a charge can be
registered on it that will ensure payment is made when the property is sold.
 Bankruptcy - This involves an application to the County Court for a petition to make
the chargepayer bankrupt.
 Liquidation - If the chargepayer is a limited or public limited company the authority
can commence proceedings to have the company wound-up (leading to
Liquidation). The necessary action for this would be taken in the County Court
 Committal to Prison - If an account has been returned by the bailiffs unexecuted
“insufficient goods on which to distrain” and payment cannot be obtained by one of
the other remedies mentioned above, an application can be made for the
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chargepayer to be considered for committal to prison. The chargepayer will be
required to attend the Magistrates Court to explain why they should not be
committed to prison in default of the outstanding balance. At the hearing the
Magistrates will conduct an enquiry into the means of debtor which could result in
any of the following: a) Immediate Committal
b) Suspended Committal coupled with an order for payment
c) Remit either part or all of the debt
The debtor may have contacted the authority prior to the hearing
and made an arrangement to pay. These cases will be withdrawn
by the authority but reinstated if the debtor fails to keep to the
arrangement.
If the debtor fails to attend at the hearing the authority will
make application for warrants of arrest to be issued by the court
either with or without bail.
Mandatory Write-offs
Certain circumstances exist where it would be normal and reasonable to automatically
consider a debt for write off irrespective of the size of the debt.
1 Bankruptcy
Upon notification from the trustee in bankruptcy or official receiver the local authority will
complete a proof of debt covering all outstanding charges up to the date of the bankruptcy.
Once a claim has been submitted the account(s) should be coded appropriately and
submitted for write-off. In the case were more than one person is liable for the debt action
will be taken against the other liable person for any monies due.
This type of debt ranks as an unsecured debt and it is unlikely that any payment will be
forthcoming from the trustee in bankruptcy. If full or part payment is received any amounts
already written off with be written back on to the accounts.
2 Individual Voluntary Arrangement
This is an alternative course of action available to an individual wishing to avoid the
restrictions made by a bankruptcy order. It involves the debtor making an offer to all creditors
that is less than the full amount of the debt outstanding to be repaid over a period of time in
full and final settlement. If creditors holding at least 75% of the total debts agree to the offer,
the Arrangement is approved and this affects all creditors notified prior to its approval. An
insolvency practitioner then manages the arrangement until the payments agreed have been
made. There is no discretion to be included in such an order once it has been agreed. If the
debtor fails to keep to the agreement made in the order any of his creditors can
subsequently petition for their bankruptcy.
3 Liquidation
Upon notification from the official receiver or agent acting on behalf of the official receiver the
authority should file with the official receiver or agent a proof of debt form of all monies
outstanding to the date of the liquidation. Once a claim has been submitted the account(s)
should be appropriately coded and submitted for write off.
This type of debt ranks as an unsecured debt and therefore it is unlikely that any payment
will be forthcoming from the official receiver or agent. If full or part payment is received any
amounts already written off with be written back on to the accounts.
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4 Statute Barred
Certain debts will fall outside of legal jurisdiction either because the debtor may have left the
country or 6 years may have elapsed since the debt was incurred and recovery action has
not already been taken.
Cases of this type are rare but where they do occur legal action cannot be taken to recover
the debt so they will be recommended for write-off.
5 Remitted by the Magistrates
At a committal hearing the Magistrates may remit part or all of the debt if they feel it would
be unreasonable to expect the chargepayer to make payment.
In such a case there is no alternative but to write-off the amount remitted.
Discretionary Write-offs
In addition to the circumstances where the Council is legally prevented from taking action to
pursue the recovery of monies due, there will be instances where recovery cannot be
enforced because either:  the debtor cannot be traced,
 the chargepayer has died & there are no monies in the estate to pay the outstanding
charge
 it is uneconomical to collect the debt, because of its value in comparison with the
cost of recovery action, or
 the chargepayers personal circumstances mean that to make payment would cause
unreasonable hardship.
1 Absconded
These are cases when the debtor has absconded and attempts to trace them have been
unsuccessful. Under such circumstances there is little alternative but to write-off the debt.
This clears the accounts of irrecoverable debts and allows resources to focus on those debts
that can be recovered.
Before a debt can be considered for write-off the following procedures will be carried out: 



Check the Council Tax and Benefits database to see if the person has re registered
at another address within the city.
If the property had been rented, check with any landlord or letting agent for a
forwarding address.
If a Limited Company check Companies House and Equifax for details of the
company i.e. names and addresses of directors and position regarding the status of
the company.
Make two enquiries via LoCTA (if home address of the debtor is known) allowing at
least one month between enquiries (this allows time for LA databases to brought up
to date).
2 Deceased
When a debtor dies leaving outstanding debts but there are no monies available from the
estate, the debts will be treated as irrecoverable and put forward for write off.
In these cases the solicitors acting for executors will be approached for payment before any
recommendation is made to write-off the debt.
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3 Uneconomical Amounts
Collecting debt can be an expensive process and in some cases the cost of recovery action
makes pursuit of the debt uneconomical. The level of individual debt written off in these
cases can vary depending on the recovery stage reached in a particular case.
4 Hardship
Where a customers circumstances are such that to make payment would cause
unreasonable hardship the amount outstanding can be considered for write off. Each case is
considered on its merits and the amounts involved may vary considerably.
Write-off procedure
A report is prepared for Lead Member showing the number and value of the cases.
Once approved each individual case is written off the system using automated procedures,
where available.
If at anytime after a debt has been written off, payment is received in respect of that debt,
then the amount involved will be written back on to the accounts.
Reports to Members
Reports will be submitted to Customer & Support Services Lead Member for approval on an
ad hoc basis.
Updated 1/3/2007
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