Threat of distraint

Introduction

Distraint is a process whereby the Revenue may take some of your possessions for sale at auction towards settlement of an unpaid tax bill. The collector has the legal power to do this without any court order.

Distraint is a very ancient course of action, involving many unfamiliar terms like 'seizure', which can sound quite frightening. There will be a very short period of just five days between the time that the collector visits, and the time that your goods are removed for sale. And an item of great importance to you may fetch only a small fraction of its true value at an auction.

So threats of distraint should not be ignored, but it may be reassuring to know that:

• the collector should act within the law, and you need not fear the illegal behaviour that is sometimes reported of bailiffs who carry out distraint for other debts,
• the collector cannot force his way into your premises without a court order, and such orders are very unusual, and
• in practice only a tiny number of distraint visits lead to sales at auction (about one visit in a thousand).

The arrival of the collector

The collector may visit at any time between sunrise and sunset, on any day except a Sunday or a bank or public holiday.

He will normally have warned you that he is considering making a distraint visit, but he does not need to make an appointment and he will usually just turn up at a time that suits him.

The collector may be accompanied by a private bailiff. The bailiff has no legal powers against you, and is there to advise the collector on the value of your goods.

Entry to your premises

The collector will need to enter your home or business before the process of distraint can begin. By law, this must be peaceful entry. The collector may not make a forced entry without a court order, and these are very unusual. Denying the collector access does not of course end the matter; it is a wake up call however and will give you a bit of time to sort out your affairs. In particular any outstanding tax returns should be dealt with urgently.

Once the collector has entered your premises, he should tell you what tax is owed and give you a chance to pay it. If you do not pay, the process of seizure may begin.

Tips from The UK Insolvency Helpline

If you do not agree that you owe the tax demanded, or believe it is a lot less, you should tell the collector, but you will find that he is in a non-negotiable position once he is in your home. These days collectors carry mobile phones, so they will no longer withdraw to check the position. The onus is on you to contact the Revenue if you dispute the demands. There is a particular problem here if you have outstanding tax returns because the collector will not have access to the full picture of your indebtedness - the situation may in fact be very different from his understanding. This makes it even more advised not to let him gain entry.

Seizure

Seizure describes the process where the collector looks around your property and prepares a list of goods which might be taken for sale at auction (known as a distraint notice and inventory ).

He will not normally remove the goods straight away but will ask you to sign an agreement - known as a walking possession agreement - under which you are given at least five days to settle the tax, or make an acceptable offer to pay. If you do not, the collector may return after that period and remove the goods listed on the distraint notice and inventory for sale at auction. (Under the walking possession agreement, you must not sell or remove any of the goods that have been listed.)

Goods which should not be seized

There are certain kinds of goods which are exempt from distraint, i.e. they cannot be seized.

"We have no right to seize property which you can prove belongs to someone else or which is jointly owned. We will not seize perishable food, beds and bedding, clothes, sufficient furniture for you to sit at a table and basic cooking equipment. Nor will we seize livestock or the necessary tools of your trade."

The Revenue's internal guidelines list several other items which should not be seized, including:

• goods under a hire purchase agreement
• goods hired to, or by, you
• goods subject to a retention of title clause
• loose money (coins or notes) but not a coin collection
• fixtures and fittings which, if removed, would cause damage to the fabric of the building

Tips

Many possessions in your home may be owned by someone else living in the property, or may be jointly owned, and so will be exempt. While it is helpful to have documents which prove such ownership, it may not be essential. For example, if you point out that something was given to you as a wedding present (and so is jointly owned), or was given to another member of your family as a birthday present (and so is owned by them), the collector should accept that it cannot be seized.

If a collector visits your home, he will usually be looking for items of particular value, such as work s of art, antique furniture or motor vehicles. If you have no goods like this, or other items of value, you may be perfectly happy to allow the collector into your home to see for himself that there is nothing worth seizing.

If a collector visits your business, he may not put you out of work by seizing the necessary tools of your trade, as these are exempt. However, he is allowed to seize any trading stock, which can be very damaging.

Motor vehicles

In practice, the assets which are most commonly seized are motor vehicles (cars, vans and lorries), as these can most easily raise a sizeable amount at auction.

If you have a vehicle, consider whether it should be exempt from seizure because it is a 'necessary tool of your trade'. If so, you should tell the collector this.

However, we must warn that the Revenue does not often accept that a vehicle is exempt just because it is used in your business. It must be 'necessary' in the sense that you could not trade without it.

For example, the collector may not accept that a car used by a taxi or minicab driver is a 'necessary tool of your trade'. He may argue that you could continue to trade by hiring another vehicle, even if that would be very expensive for you.

Tip

If you are worried that the Revenue may seize a vehicle used in your business, think carefully whether you could trade without it. In one case, a taxpayer ran a luxury limousine service for business executives and government officials, which needed a special form of insurance. He proved that he would not be able to get insurance cover if the business used hired vehicles. The Revenue accepted this, and agreed that his vehicles were exempt.

What should you do if the collector seizes an asset which you think is exempt?

If the collector seizes an asset which is exempt, he is breaking the promise to act fairly, which is given in the Revenue's Service Commitment, and you should make a complaint right away.

Mark your letter of complaint 'urgent', and send a copy to the collector, asking him to agree not to take further action until your complaint has been dealt with. In this situation, a complaint should be handled very quickly.

What should you do if you are worried by threats of a distraint visit?

Some people are very frightened by the thought of a collector turning up at their home.

If so, the first thing is to ensure that you have done everything possible to pay the tax or reach an agreement with the collector. In some cases it is not possible to obtain an agreement.

You may be worried because you have a family member who suffers from poor health or stress, who might be very upset by such a visit. If so, you should explain this to the collector and ask him to visit at a time when that family member is expected to be out. He should normally agree, and it is a good idea then to write a letter to him confirming what has been agreed.

If you are yourself upset at the thought of the collector turning up at your home, you might be able to persuade him that such a visit would be pointless because you have no assets worth seizing, perhaps by offering him a list of the main items that you own. If he will not agree to this, you will have to rely upon your right to deny him entry.