Write Off of Uncollectable Debt

Report of the Finance & Resources Portfolio Holder

Recommended:

That the debt detailed in the report, totalling £54,791, be written off in the Council’s accounts as uncollectable.

SUMMARY: In accordance with the Council’s Financial Regulations, the report seeks approval for the write off of a business rates debt that has proved to be uncollectable.

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 & Revenues 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 & Resources Portfolio Holder and amounts over £25,000 must be referred to Cabinet for approval.

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

Background

Debts related to one business rates account 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 company entered liquidation the Council had pursued its normal billing and recovery procedures. The debt in question relates to the 2020/21 financial year.

The debt recommended to be written off is summarised in the following table.

Business	Debt	Reason for Write-Off	Amount £
Snows Timber Ltd	Business Rates	Company in liquidation	54,791
Total	54,791

Options

The debt recommended to be written off relates to a business that is in liquidation. Proof of debt has been submitted, however 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 2021 included £5,479 in respect of this debt, of which the Council’s share was £2,192.

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	54,791
Other bodies’ share of total debt (60%)	(32,875)
Council share of bad debt (40%)	21,916
Less: Amounts already provided in previous years’ accounts	(2,192)
Reduced levy on business rates growth in 2021/22	(9,862)
Net cost to the Council in 2021/22	9,862

The net cost of the debt 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 one debt for which there is no reasonable prospect of recovery. It is recommended that it is 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 & Resources) Councillor M Flood
Officer:	Carl Whatley	Ext:	8540
Report to:	Cabinet	Date:	30 March 2022