The Tribunals, Courts And Enforcement Act 2007, introduced the term 'legally taking possession of goods' in place of the term 'distraint' and the phrase 'controlled goods agreements' in place of 'walking possession agreements'. On this page we use both terms as it is likely that either may be encountered in recovery proceedings.

Legally taking possession of goods (formerly known as distraint) is a process whereby HM Revenue and Customs may take some of your possessions for sale at auction towards settlement of an unpaid tax bill. HM Revenue and Customs has the legal power to do this without any court order.

Legally taking possession of goods is a very ancient course of action and can sound quite frightening. There will be a very short period of just five days between the time that an HM Revenue and Customs officer 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 to legally take possession of goods should not be ignored, but it may be reassuring to know that:

• the HM Revenue and Customs officer should act within the law, and you need not fear the illegal behaviour that is sometimes reported of bailiffs who carry out a similar process for other debts,
• the HM Revenue and Customs officer 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 visits to legally take possession of goods lead to sales at auction (about one visit in a thousand).

The arrival of the officer from HM Revenue and Customs

In income tax cases, the HM Revenue and Customs officer may visit at any time between sunrise and sunset, on any day except a Sunday or a bank or public holiday. Slightly different rules apply for VAT.

He will normally have warned you that he is considering making a visit to legally take possession of goods (or distrain), but he does not need to make an appointment and he will usually just turn up at a time that suits him.

The HM Revenue and Customs officer 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 HM Revenue and Customs officer will need to enter your home or business before the process of legally taking possession of goods can begin. By law, this must be peaceful entry. The HM Revenue and Customs officer may not make a forced entry without a court order, and these are very unusual. Denying the HM Revenue and Customs officer 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 HM Revenue and Customs officer 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 legally taking possession of goods may begin.

Tips from TaxAid

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

Taking possession of goods

The HM Revenue and Customs officer looks around your property and prepares a list of goods which might be taken for sale at auction.

He will not normally remove the goods straight away but will ask you to sign an agreement - known as a controlled goods agreement (formerly 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 HM Revenue and Customs officer may return after that period and remove the goods listed in the controlled goods agreement for sale at auction. (Under the controlled goods agreement, you must not sell or remove any of the goods that have been listed.)

Goods which should not be taken

There are certain kinds of goods which cannot be included when HMRC are legally taking possession of goods. The important examples are described in HM Revenue and Customs' leaflet Distraint - What it means for you. This is available free from all tax offices or on the HM Revenue and Customs website.

“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.”

HM Revenue and Customs' internal guidelines list several other items which should not be included when legally taking possession of goods. These include:

• 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 from TaxAid

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 HM Revenue and Customs officer should accept that it cannot be included when legally taking possession of goods.

If an HM Revenue and Customs officer visits your home, he will usually be looking for items of particular value, such as works 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 HM Revenue and Customs officer into your home to see for himself that there is nothing worth seizing.

If an HM Revenue and Customs officer 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 include trading stock when legally taking possession of goods, which can be very damaging.

Motor vehicles

In practice, the assets which are most commonly included when legally taking control of goods 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 because it is a ‘necessary tool of your trade’. If so, you should tell the HM Revenue and Customs officer this.

However, we must warn that HM Revenue and Customs 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 HM Revenue and Customs officer 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 from TaxAid

If you are worried that HM Revenue and Customs 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. HM Revenue and Customs accepted this, and agreed that his vehicles were exempt.

What should you do if the HM Revenue and Customs officer seizes an asset which you think is exempt?

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

Mark your letter of complaint ‘urgent’, and send a copy to the HM Revenue and Customs officer, 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.

For more advice on making a complaint, see Your rights as a taxpayer.

What should you do if you are worried by threats of a visit to legally take possession of goods?

Some people are very frightened by the thought of an HM Revenue and Customs officer 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 HM Revenue and Customs. For more information, see Seeking an agreement with HM Revenue and Customs . But 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 HM Revenue and Customs officer 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 HM Revenue and Customs officer 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 (see 'Entry to your premises' above).

For a more detailed explanation of legally taking possession of goods (distraint) go to the section Debt advice for advisers.