What is a Liability Order and the Company Consequences?

If you are struggling to pay your business rates, you may be at risk of a liability order. Companies that have been issued a reminder to pay their business rates face the very real threat of a summons and, subsequently, a liability order. 


Understanding the Process of a Liability Order

In this article, we will outline what is a liability order, and the action you need to take should your company receive one.

What is a liability order?

A liability order is a court demand for you to pay the full amount of business rates you owe, along with additional costs. Before your company has a court liability order submitted against you, a summons will be sent. The summons is the action councils take before sending your firm a liability order. This document details the date and time for your Magistrates hearing, to consider whether you will be issued with a business rates liability order.

Liability Order

As soon as the summons is posted, your company will incur costs of £61. The best option for your company is to pay your business rates in full, but we understand this may be difficult if you are suffering from cash flow problems. However, if you do not pay the total of your business rates, you will be charged a further £14 in council costs. This brings your council costs to pay up to £75, as well as your business rates in full.

The council will state that you do not have to attend the Magistrates court in regards to the summons. However, this will sacrifice your chance to explain your company’s predicament, and a liability order will automatically be issued in your absence.

Can I appeal the liability order?

You can appeal the order. However, it is a very costly and expensive route to take, with a small window of time to do so. Similar to applying to set aside a statutory demand, you have to act fast when it comes to a court liability order.

It is advised that you contact the council before your summons hearing and explain the company’s situation. All effort should be made to negotiate a payment plan. If the council accepts your finance issues, they will cancel the summons, thus stopping the liability order enforcement against your business. You can also dispute the bill if you believe it to be incorrect.
There are several reasons as to why the Magistrates may not submit a court liability order against your company. We have outlined the reasons as follows:

  • The summons has been paid full, with receipts as evidence, and there is no reason to issue a business rates liability order.
  • You are exempt from paying business rates.
  • The liability order application was submitted six years after issuing the first demand to your company.
  • The council has not asked you to pay your business rates in accordance with the Local Government Finance Act 1988 and the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989. Therefore, the application for the business rates liability order is void.
  • The insolvency procedure has already set in, and your company has been issued with a winding up petition.

To save time and costs for your business, you should seek urgent advice from the council if you are struggling to pay your business rates. A payment plan is the best course of action for your company. It’s also worth noting that the belief you should be provided a discount, or exemption, on your business rates is not a valid defence for the liability order.

What are the liability order powers of enforcement?

If you did not attend the court and a liability order has been issued, the council gains further powers. Submitting a court liability order allows the council greater powers in collecting the debt your business owes. They can collect the debt through a variety of methods:

  • High court enforcement officers (previously known as bailiffs) are instructed to recover the debt. You may incur further costs if they are required to go to your business property.
  • The council can commence insolvency proceedings against your company, if your debt is greater than £750 and there are sufficient company assets.
  • A very rare occurrence is that the council can apply to the Magistrates, for the result of imprisonment. However, we must stress this is rare and only if the enforcement agents are unsuccessful in recovering the debt owed.

What should I do?

If your company is suffering financial issues, seek advice as soon as it becomes apparent. The longer you ignore the problem, the worse it will be for your long-term standing. We have outlined the business funding options for struggling companies with our comprehensive guide. If you have received a summons, we urge you to contact the council immediately and attempt to put a payment plan in place, before the inevitable business rates liability order is issued.

If you would like to speak to someone regarding your business funding issues, you can get in touch with one of our business rescue experts for free, confidential advice.

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