Begbies Traynor Group

Understanding HMRC Distraint Orders and Notice of Enforcement

Date Published: 23/05/2024

If your company owes money to HMRC or another creditor and you have been unable to settle the debt, they may take out a Distraint Order against your company. This involves the seizure of goods to the value of the debt, plus the fees for enforcement action.

HMRC are known to use this method of debt recovery after several failed attempts have been made to recoup tax and National Insurance liabilities. A visit from an HMRC Enforcement Officer is unlikely to be a surprise, therefore, if your company has already received correspondence from them with regard to Corporation Tax, VAT or PAYE debts.

Any creditor can take enforcement action against you, but except from HMRC and landlords, they have to go through court process to obtain the Order. The fact that HMRC are not required to obtain a court order makes Company Distraint a common debt collection method for tax liabilities.

As far as HMRC is concerned, it is a simple and straightforward way to recover their monies. From your point of view it can be a stressful and distressing time, particularly if you do not know your rights.

A notice of pending enforcement action needs to be delivered to your company by mail, fax, email, or in person by an HMRC field officer. The notice gives you seven days in which to pay the debt in full, or to make alternative arrangements such as a Time to Pay instalment plan. This provides more time to pay, but does not alter the amount owed.

If you fail to act quickly enough, are unable to pay the amount due, or have tried unsuccessfully to negotiate longer payment terms, an HMRC Enforcement Officer or bailiff appointed by HMRC will return to take control of goods via a Controlled Goods Agreement.

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Notice of Enforcement

When a Notice of Enforcement is served on you, the best advice is to act quickly as time to act is limited to seven days from receipt of the notice. You should seek advice and assistance from professional insolvency practitioners as they may be able to negotiate terms with HMRC, and can advise you regarding your rights during future bailiff visits if agreement with the creditor cannot be reached.

Begbies Traynor offer a free same-day consultation, allowing immediate action to be taken to deal with this serious situation.

HMRC do not have to give notice of the first visit by a field officer. If you have received correspondence from HMRC regarding unpaid debt, a visit could be looming, but you are under no obligation to let them into your premises at this stage.

If an officer delivers the notice in person, they will probably wish to discuss the debt with you and talk about your plans for repayment, if any. They will also seek to confirm the validity of the debt, and should be able to take payment if it is forthcoming.

Administrative errors are sometimes made by creditors when issuing a Notice of Enforcement. You should check that the debt mentioned is not in dispute, that all other details are correct, and that they have in fact sent it to the correct company. It is not unknown for a company to receive such a notice in error.

Seizure of goods under the Controlled Goods Agreement (CGA)

Previously known as a Walking Possession Agreement, you will be asked to sign a Controlled Goods Agreement if you fail to pay in full after seven days. If you sign the Agreement, the company receives a further seven-day period in which to pay, otherwise the goods listed will be seized for sale at public auction.

On choosing not to sign the Controlled Goods Agreement, the bailiff or HMRC Enforcement Officer may arrange for the immediate removal of goods. It is against the law for directors to remove any assets or goods listed on the Agreement.

Although HMRC often use Company Distraint to collect overdue tax payments, other creditors and lenders also view it as a reliable way to collect monies or security on a loan. As already stated, other creditors have to petition the court for a Distraint Order and only HMRC and landlords are able to serve an Enforcement Notice without prior court agreement.

Begbies Traynor is the leading corporate recovery firm in the UK. To arrange a same-day consultation, free of charge you can contact any of our offices nationwide. We can help you deal with HMRC and decide on the best course of action for your company.

About The Author

Meet the Team

Jonathan was a founding director of Cooper Williamson which was acquired by Begbies Traynor in October 2013. 

Jonathan was involved in the inception and continued with the development of the "Real Business Rescue" website, which provides advice and assistance for the directors of limited companies which are experiencing various degrees of financial distress throughout the UK. 

Jonathan is a member of the Insolvency Practitioners Association MIPA and is a Member of The Association of Business Recovery Professionals MABRP.

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