Limitation on Unpaid Council Tax

Applications to a Magistrates Court for council tax liability orders, for unpaid council tax, are subject to a 6 year limitation period, contained in the Council Tax (Administration and Enforcement) Regulations 1992 (SI 1992/613), specifically reg.34 (3). Reg 34(3) reads, so far as is relevant:

‘…no application may be instituted in respect of a sum after the period of six years beginning with the day on which it became due under Part V.’

In other words, the application for a liability order must be made within 6 years starting with the day the council tax became due. Another way of putting this is, as Lloyd LJ said in Bolsover District Council v Ashfield Nominees Ltd [2010] EWCA Civ 1129 [2011] Bus LR 492, at paragraph 1:

‘A liability order is limited to amounts of council tax which became due within the period of six years before the application to the magistrates' court.’

By analogy, this time limit applies to the ability to found a bankruptcy petition or winding up petition on due but unpaid council tax. At paragraph 34, Lloyds LJ said:

‘I accept that, whereas unpaid council tax can rank as a debt for the purposes of the Insolvency Act 1986 even if no liability order has been made, this is subject to the proviso that, if the tax fell due for payment more than six years previously, so that a liability order could no longer be applied for in respect of that sum, it would not be a valid debt for the purposes of insolvency proceedings. That is no more than an application of the 1992 Regulations by analogy.’[1]

It is interesting to note that a similar regulation applies to National Non-Domestic Rates (NNDR or Business Rates), namely, reg.12(3), which reads so far as relevant:

‘…no application may be instituted in respect of a sum after the period of 6 years beginning with the day on which it became due under Part II.’

In Re Karnos Property Co. Ltd (1989) 5 B.C.C. 14 (1988), Mervyn Davies J heard a case in which it was conceded by the Local Authority/Billing Authority that, after 6 years, the Local Authority/Billing Authority ceased to be a creditor of the ratepayer for the purposes of presenting a winding up petition. Mervyin Davies J said, at 17-18:

'[Counsel for the local authority] conceded, as I understand, that rates unpaid for six years and never the subject of a distress warrant were irrecoverable in any way; so that the local authority ceases to be a creditor and thus may not petition. But, said [Counsel for the local authority], once a distress warrant has been obtained it remains always available for execution and thus preserves the local authority its character as a creditor and ever able to petition. I do not accept this submission. If one assumes that the two distress warrants issued in this case remain available to the local authority, I do not think it follows that the provisions of the Limitation Acts that I have mentioned do not operate to stop the presentation of a petition. The effect of sec. 2(1) of the 1939 Act (or sec. 9(1) of the 1980 Act) is that a petition may not be presented if six years have passed since the rates were demanded. There is nothing there to qualify the position if a distress warrant happens to be current. A petition lies not because a distress warrant has been or may be issued but because a local authority is a “creditor” as that word is and has been used in the Companies Acts...'

The key date therefore to identify, is the date the council tax become 'due' under Part V of Council Tax (Administration and Enforcement) Regulations 1992 (SI 1992/613). Part V is the Part that contains reg.17 to 31 inclusive. In Regentford Ltd v Thanet DC [2004] EWHC 246 (Admin) [2004] 2 WLUK 477, Lightman J determined that: (1) council tax liability, became a duty to pay, when a demand notice was served; and (2) the service of the demand notice made the council tax due.

SIMON HILL © 2021

BARRISTER 

33 BEDFORD ROW  

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