Write Off of Uncollectable Debts

Report of the Finance Portfolio Holder

Recommended:

That the debts detailed in the report, totalling £59,673, be written off in the Council’s accounts as uncollectable.

SUMMARY: To seek approval for the write off of business rates that have proved to be uncollectable, in accordance with the Council’s Financial Regulations.

Introduction

The Council has processes in place to ensure that income due is identified, collected, receipted and banked promptly. However, there are occasions where money owed to the Council proves to be uncollectable.

The Council’s Financial Procedure Rules give the Head of Finance authority, in consultation with the appropriate Chief Officer, to approve the write-off of bad debts or other sums due to the Council up to a limit of £5,000.

Amounts in excess of £5,000 must be authorised by the Finance Portfolio Holder and amounts over £25,000 must be referred to Cabinet for approval.

This report seeks approval for the write off two business rates debts above the £25,000 threshold that have proved to be uncollectable and for which there is little or no prospect of future recovery.

Background

Debts related to two business rates accounts are recommended to be written off as uncollectable.

It is inevitable that it will be necessary to write off certain amounts as uncollectable when businesses go into liquidation / individuals declare themselves bankrupt with arrears owed to the Council.

The Council has no power to pursue recovery of outstanding amounts owed when a company enters administration or goes into liquidation. However, the company may continue to occupy a premises and continue to be liable for business rates.

Up to the point that the companies entered liquidation / administration the Council had pursued its normal recovery procedures, including, for example, obtaining Liability Orders from the Magistrates’ Court.

The debts recommended to be written off are summarised in the following table.

Business	Debt	Reason for Write-Off	Amount £
Butters Café Ltd	Business Rates	Company dissolved	27,924
Snows Timber Ltd	Business Rates	Company in liquidation	31,749
Total	59,673

Options

The debts recommended to be written off relate to businesses that have been dissolved or are in liquidation. Proof of debt has been submitted for the company in liquidation, but there is no realistic prospect of any distribution to creditors.

There are no alternative options available to continue recovery action for these debts.

Risk Management

An evaluation of the risks indicates that the existing controls in place mean that no significant risks have been identified at this time.

Resource Implications

Each year, as part of the preparation of the Collection Fund (the statutory account through which Council Tax and Business Rates are administered) the Council makes an allowance for uncollectable debts. The allowance reflects that it is not possible to collect 100% of bills raised due, for example, to company failure.

The bad debt allowance calculation is based on a number of factors, including the age of the debt and the recovery stage to which the debt has been progressed. The bad debt allowance at 31 March 2020 included £28,867 in respect of these debts, of which the Council’s share was £11,547.

The impact of writing off business rates debts is shared between the Council, central government, Hampshire County Council and Hampshire Fire and Rescue. The impact on the Council’s budgets is shown in the table below.

£
Total value of business rates debts to be written off	59,673
Other bodies’ share of total debt (60%)	(35,804)
Council share of bad debt (40%)	23,869
Less: Amounts already provided in previous years’ accounts	(11,547)
Reduced levy on business rates growth in 2020/21	(6,161)
Net cost to the Council in 2020/21	6,161

The net cost of the debts recommended for write-off can be contained within the bad debt allowance for the current year.

Equality Issues

This report does not identify any issues related to equality.

Conclusion and reasons for recommendation

The report identifies two debts for which there is no reasonable prospect of recovery. It is recommended that they are written-off in the Council’s accounts.

Background Papers (Local Government Act 1972 Section 100D) None
Confidentiality It is considered that this report does not contain exempt information within the meaning of Schedule 12A of the Local Government Act 1972, as amended, and can be made public.
No of Annexes:	0	File Ref:	N/A
(Portfolio: Finance) Councillor M Flood
Officer:	Carl Whatley	Ext:	8540
Report to:	Cabinet	Date:	10 March 2021