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Council Tax debtBreathing Space‘ is the proposed new government initiative to assist those who have debts to be able to discuss those debts with a debt management agency and, where appropriate, enter a debt management scheme.

In June 2019 the government, having previously issued a consultation document, published an outline plan of how the new system would work in practice. For the purposes of council tax collection and enforcement this proposal would introduce some key changes in to how the current system works.

60 day freeze on action

It is proposed that, from the date of application to an authorised debt management agency, the council will have to free action on the debt which has been identified in the application for a period of up to 60 days (to be reviewed after 30 days). Where a person is deemed to have mental health issues then, in defined cases, the freeze may be made indefinite. This freeze would include any council tax which has become due up to the date of the application but not include any council tax liability which has not yet become due.

For example

An instalment is due on 01 April 2020 of £100.00 followed by 9 monthly instalments of £100.00 (£1000 in total)

The first payment of £100.00 is not made.

If a ‘breathing space’ application is made before the reminder notice is issued then the application will only apply to the £100.00.

If a ‘breathing space’ application is made after the reminder notice is issued but within the initial 7 day payment threshold the application will only apply to the £100.00.

If a ‘breathing space’ application is made after the reminder notice is issued and after the initial 7 day payment threshold the application will apply to the £1000.00 as the full balance has become due.

Whilst any debt is frozen for the 60 days then the local authority cannot initiate or continue any enforcement action in respect of the balance in the ‘breathing space’ application. This means that they local authority would have to suspend any action they are taking, although their is a specified intention that there will be exceptions to this general rule.

Any council tax existing enforcement, with the exception of an attachment of earnings, would have to be paused. No new attachment of benefit/earnings orders can be issued for the debt

No new application for a liability order could be made however existing applications could continue to judgement (presumably this would allow a summons which had already been issued to proceed to a liability order).

During the 60 day period the authorised debt management agency may either make an application for a debt management plan, come to an arrangement with the council or terminate the period. If nothing is in place at the termination of the period then it appears that the council may continue action as usual.

Split debts

What is apparent from the outlined proposal is that the ongoing council tax debt is not subject to the ‘breathing space’ application and so there will be cases where an application is made before the whole year’s balance has become due. This means that the debt from the date of the application is not covered by the ‘breathing space’ and so action will continue on the remaining amount. How this will be managed in practical terms by councils is yet to be seen.

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This article is solely the view of LGFA92, the Council Tax agents and experts, based on our interpretation of legislation. Your local authority is free to dispute this view. A binding decision may require the intervention of a valuation tribunal.