Someone from HM Revenue & Customs has turned up on my office doorstep threatening ‘distraint’ for tax they say is unpaid. What does this mean?

Distraint is a process by which HMRC are able to take possession of and if necessary sell at auction goods to recover unpaid tax – it does not require a court order or judgement. To use this process the person visiting must be an HMRC officer, they cannot send a private bailiff. The normal process is that HMRC officer inspects and then lists the items which he intends to seize. Having done so he will want the taxpayer to agree to ‘walking possession’ whereby the goods are not removed and the taxpayer has time to make payment of the tax due, agree arrangements for the payment of the tax due or show that the tax is not actually due.

Your initial decision is whether to let the HMRC officer enter your premises – without a warrant he cannot break in. If it would show that you have nothing of value it may be worthwhile allowing this. However if you have valuable assets and the tax is not actually due, you may want to refuse entry while you take advice from your accountants and try to get HMRC records to show the corrected amount due, which may require the submission of outstanding returns. It is important that it is made very clear to the HMRC officer where assets are not owned by the taxpayer owing the debt.

Distraint is a serious process and it is important that you take immediate advice on your situation, particularly as the price obtained by HMRC if your goods are actually sold will usually be significantly less than the value you put on them.