HMRC has the power to take your client's business assets and sell them at auction in settlement of an unpaid tax bill. This process is called “distraint”.
So who can distrain?
Any creditor has the power to do this if they obtain a court order. However, HMRC or landlords do not need a court order as they have ancient rights to collect their debts.
If your client owe taxes, the first step in the process is usually a visit by an HMRC “field officer” who is usually based locally and whose initial purpose is to check the address and make contact. After that they may enforce the debt by taking “walking possession” of any goods such as stock or equipment.
This is where an HMRC officer or a bailiff (for the County Court) or Sheriff (for the High Court) has visited your premises and obtained entry under a distraint notice. He /she has asked for payment of the proven debt. If the business has not paid this plus the court and their costs they can "take possession" of the goods, equipment, fixtures, stock etc on the premises. Legally they cannot force their way in but can enter via an open window for instance. So the practicalities are such that it will be difficult to keep them out!
Effectively if no deal is done or pay in full the field officer or their agents can remove and sell the assets in 5 days. To sell the assets, after they are covered in this way is a criminal offence. If the bailiff has obtained a walking possession he can force entry to recover the goods after the 5 day period. However, it should be noted that the agent cannot distrain on "tools of the trade" as otherwise the business is damaged irrecoverably.
If the business owner does not agree that they owe the tax demanded, you should tell the HMRC officer, but he/she is in a non-negotiable position once he/she is on the premises.
So, if a client's business have a distraint threat or have been visited by an HMRC officer or bailiff , then they must ACT. In the event that the business is not viable going forward call us and we can put the company into liquidation quickly and lower the risk of personal liability.
Alternatively, if the you feel you can pay the debt and have a viable business but need more time to put a rescue plan together then we can help. Perhaps a company voluntary arrangement where you agree to pay off a proportion of the debt over a period of 3-5 years can be used. There are other options such as administration.
He is managing director of Company Rescue Ltd and KSA Group Ltd - a specialist firm of turnaround practitioners. Keith has been featured in Mike Southon's column in the Financial Times and his book - This is How Yoodoo on entrepreneurs.
More than 5,000 people have contacted KSA Group since Keith launched this...