Steep rise in court fees will have major impact on small businesses

A major increase to the cost of going to court in England and Wales is likely to have a disproportionately adverse impact on small businesses, a legal expert has warned.

The House of Lords voted on the evening on March 4, 2015 to approve the Government’s proposed increase in court fees. Now, the cost of taking civil and commercial cases to court will increase by as much as 600 per cent.

The enhanced court fees will involve raising the costs of commercial debt recovery, among other commercial proceedings, generating extra money for Her Majesty's Courts and Tribunals Service (HMCTS).

However, the changes could severely limit access to justice for individuals and SMEs, with the Law Society estimating that the number of claims will decrease by over 50 per cent following the introduction of the higher fees.

Sara Beaumont, Associate and Head of Debt Recovery at WHN Solicitors said: “Scores of business owners who work hard to manage their credit control systems will be hit the hardest.The significant increase in court fees is likely to put SME’s off recovering debt in court altogether.

“While the Government believes this will stop tax payers footing the bill for court proceedings, local businesses could be forced into liquidation because they will be unable to recover debt owed to them.”

The increase will apply to claims that aim to recover a sum of money, and affects the sums payable to the court to issue the claim. For small claims (up to the sum of £10,000) the current fee remains unchanged but for claims above £10,000, the fee will rise to 5 per cent of the amount claimed, including any claim for interest. A claim for an unspecified amount will incur the maximum fee.

By way of example, the current fee to issue a claim for £100,000 is £1,115, as of March 9 this will increase to £5,000. The new maximum fee for claims over £300,000 will be £10,000.

Sara added: “The changes provide no assistance at all to the ever increasing, front-loaded costs of litigation.

“Businesses now need to think smart and check their current credit control process to prevent disputes from arising in the first place.

“At WHN we have a dedicated debt recovery team of specialists, helping businesses to stay on top of debtors and boost cash flow. “Improving internal procedures will reduce the risk of unpaid debts so crippling court fees can be averted.”