Small businesses chasing late payment will be hit by court fee rise

19 January 2015

Bar Council warns against "tax on justice"

London's global reputation at risk

Small businesses chasing late payments and other debts could be disproportionately hit by the Ministry of Justice's plans, announced today, to impose a 5% court fee on such claims, warns the Bar Council.

The Ministry of Justice's proposals to impose a blanket 5% fee on businesses and individuals bringing a claim for money - late payments, debt and compensation - of up to £200,000, and a minimum fee of £10,000 for larger claims, will deter many from pursuing money they are owed, says the Bar Council. It warned that small businesses which were already being crippled by late payments from customers, often larger businesses, would either not be able to pursue a claim or risk paying a hefty court fee, which could be as much as £10,000.

The Ministry last increased these fees as recently as April 2014.  The purpose of that increase was "so that the total income from all money claims issued equals their full cost."  In April the maximum fee payable (in the case of money claims for more than £300,000) was increased from £1,670 to £1,920.  The fee payable for a claim of £200,000 was increased in April from £1,080 to £1,315.

The latest proposed increases are deliberately designed to raise more money, and indeed significantly more money, from claimants than the cost incurred by the Courts in handling money claims.  The maximum fee is to be increased by 420%, from £1,920 to £10,000.  The fee payable for a claim of £200,000 is to be increased by 660%, from £1,315 to £10,000.

This will not help small businesses, who face a huge problem with late payment of debts.  Last year, Barclays reported that "In total, UK SMEs are currently owed more than £36 billion in late payments causing serious cash flow problems."

Alistair MacDonald QC, Bar Council chairman, said: "Cash-flow is the life blood of small businesses and many end up having to pursue late payments and other debts through the court system. Imposing a 5% fee may well make many small businesses think twice before making that claim, and will certainly strengthen the hand of late payers.

"If small businesses do go to court, they could face a £10,000 fee for the privilege. These sums of money are large enough to put many smaller enterprises out of business. The Coalition has made supporting small businesses a central theme of its term, but this flies in the face of that approach. Many family-run businesses know that court proceedings are available, if they need them, to ensure that they are paid for their services and products. This move will effectively take that option away from many smaller businesses. We've heard the stories about commercial giants, such as supermarkets, taking their time to pay smaller suppliers. This move will act as a deterrent for smaller companies to challenge their larger customers.

"The Ministry of Justice does not need these fees to meet the cost of money claims.  The Ministry is merely seeking to cash in on claimants who have to go to court to recovery their debts.

"The Ministry says that some of the funds raised from this hike will fund the family courts. The family courts have to be paid for, but penalising small businesses and individuals seeking redress is the wrong way of doing it. It is a tax on justice and risks pricing many out of court."

Threat to London

The Bar Council also warns that the move sends the wrong signal to the rest of the world about the UK's place as the world's leading centre for international dispute resolution, especially at a time when the UK is planning to demonstrate its credentials in legal services at the Global Law Summit in February 2015.

Alistair MacDonald QC, said: "The increase in court fees threatens to undermine the hard work done by barristers and solicitors to encourage international businesses to use English law to resolve their disputes and to bring those disputes here for resolution. This latest move by the Government will be welcomed by our competitors overseas."

                                                                             ENDS

Notes to Editors

Registration for the Global Law Summit has now opened.

  1. Further information is available from the Bar Council Press Office on 020 7222 2525 and Press@BarCouncil.org.uk.

  2. The Bar Council represents barristers in England and Wales. It promotes:

  • The Bar's high quality specialist advocacy and advisory services

  • Fair access to justice for all

  • The highest standards of ethics, equality and diversity across the profession, and

  • The development of business opportunities for barristers at home and abroad.

The General Council of the Bar is the Approved Regulator of the Bar of England and Wales. It discharges its regulatory functions through the independent Bar Standards Board