HMRC Distraint
and bailiffs rights

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What is HMRC Distraint and what can the bailiffs take from my business

HMRC Distraint

“HMRC Distraint” also known as ‘HMRC Distress’ is the process of legally taking possession of goods for sale at public auction, to make payment towards an unpaid tax bill. Only HMRC and landlords have the ability to ‘distrain’ without the need to go to court, and therefore where there are tax arrears, the process is very simple for HMRC to pursue, more straightforward and likely to be used than other debt collection procedures.

If you have HMRC tax arrears, which could be for PAYE or VAT, your business is likely to be insolvent and suffering cashflow problems. Being issued with an HMRC Distraint notice is a serious situation and ideally we would have recommended taking action prior to this point, to possibly negotiate a Time to Pay arrangement.

When HMRC seek to distrain over your assets, a HMRC officer will come to your place of business, without notice, to discuss what is owed to them, take an inventory of your business assets and issue the HMRC distraint notice for you to sign. The distraint notice will inform you that you have 5 days in which to settle your debts prior to bailiffs coming to seize assets to take them away for auction. In the meantime, you are not allowed to move or dispose of the assets subject to the distraint.

If HMRC distrain over my assets, what are the bailiffs entitled to take from my business?

The bailiff is instructed to recover goods equal to the value of your debt, plus the costs of removal and the sales process at auction. Taking account of the fact that the assets will often realise considerably less at auction than the replacement value, it can result in significantly more assets being removed than at first appears necessary. The bailiffs can come to your business within normal opening hours or between 8am and 8pm for Excise and VAT debt.

The necessary tools of your trade, and this really just means small items such as hand tools, rather than plant and machinery, are thankfully safe from recovery, unless you have no other goods of value available to seize. Fixtures, fittings, hired or leased items and personal property of employees, other than directors also come within the remit of items that cannot be removed under HMRC Distraint, but you have to be able to prove that they don’t belong to the company. However, typical distrainable items include cars, vans, office equipment and furniture, and stock. These items are generally of high value and will have been noted in the inventory taken during the initial visit serving the distraint notice.

I have been threatened with an HMRC Distraint Order – what should I do?

If HMRC write and threaten distraint, it is not a bluff and immediate action is required – get advice straight away.

If an HMRC officer comes to your premises they are not allowed to force entry without a magistrate’s warrant, so meet them outside of the premises, even in the car park. By not letting them in the premises, you are temporarily stopping them from seizing possession of your goods. In the meantime you will have a short window of time in which to get professional help. If the HMRC officer is inside the premises and wants to prepare an inventory, you can refuse to sign it. Again this may give you a short window to get help.

If you have passed the point of HMRC having distrained, the next stage is when the bailiff attends to remove goods. This cannot happen until at least five days after HMRC has distrained. Once the bailiff has arrived, it is still possible to negotiate with the bailiff to make a payment on account and extend the distraint.

The key is to ensure that as soon as HMRC take action against you, even if you cannot pay the debt immediately, to avoid your goods being taken away, there are still some steps you can take with the benefit of expert advice that could protect your goods and business, but you must act as soon as possible.

HMRC have become more active over the last few years in collecting unpaid taxes and following through enforcement action with Distraint Orders and winding up petitions. If you have been issued with an HMRC Distraint order then you have either failed to keep up with payment plans previously arranged with HMRC, or you have simply ignored warnings following non-payment of arrears. Once you have been issued with an HMRC Distraint Order, you potentially will only have 5 days to act to protect your business, so we recommend that you contact us on the day it is received and we can react quickly to offer the correct legal advice and sound out the options available to you. It is not too late and you can still avoid possession and auction of your assets from HMRC.

If you need help obtaining funds to pay the debt, or would like to consider a Time to Pay Arrangement - Cashsolv can help. Cashsolv provide fast, short-term business loans up to £250,000 within 24hours, or can act on your behalf to negotiate with HMRC to agree spreading payments to clear arrears over up to 12 months. Although, HMRC has a legal duty to collect taxes and will take enforcement action if necessary, it is important to remember, that actually at the end of the day, they would rather be paid what is owed than go through the process of auction of goods. Cashsolv can intervene on your behalf, to work with HMRC, to protect your business and avoid the possible disastrous consequences of your goods being taken away to be sold at auction.

For more information on HMRC Time To Pay, view our relevant pages:

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