More than £1m in debts written off by Erewash Borough Council

editorial image

Figures obtained by the Ilkeston Advertiser show that Erewash Borough Council wrote-off more than £1m worth of debt between April 2015 and June this year.

The freedom of information request revealed that the largest proportion of the £1,038,412 debt write-off was council tax, at £445,037.

Written-off business rates debt came to £292,812 with the figure in the first quarter of 2016 - at £153,728 - being significantly more than that for the entire financial year 2015-16 - at £139,084.

A spokesman for Erewash Borough Council said that, unlike council tax, which could be collected over a long time period, business rate write-off was usually settled within two-three years and was ‘dominated by insolvency’.

He added: “This must lead to the general conclusion that there is an increase in the number of business failure.

“One increasing trend appears to be the possible abuse of limited liability status to enable business rate, and possibly other debt, to be avoided.

“This is where a, usually new, limited liability company takes the lease on premises, trades for a short time and then seeks insolvency in some form or dissolves the company. Creditors are then left with little option but to write off debt.

“There is a trend which showed an increase in business rate write-off in respect of the period 2008 to 2013 which appears to be dropping back now closer to previous levels.”

The spokesman said it was possible that the apparent increase in business failure may be due to an increase in new businesses setting up during recent times.

Apart from business rates and council tax, written-off housing benefit debt came to £292,903.

The most common reasons for debt write-offs include insolvency, or the council being unable to trace the debtor over an extended period.

But the Erewash spokesman added: “The efforts to which the council goes to recover are to use all legal means available. Statutory reminder and final notice letters are followed by a summons to court where the council applies for a liability order.

“The council must consider the economy involved in recovering smaller debts and each case is individually looked at and considered.”