What are HMRC Procedures when Seizing Business Assets
The bad news for British businesses is that an ever-increasing number of organisations have had HMRC seizing business assets in the last two years. In 2014, 14 times more businesses had assets seized than in 2009. In 2015, HMRC used its powers of ‘distraint’ to seize the business assets of 1,080 SMEs. This highlights just how important it is to secure the funding you need if you are struggling to pay your tax bill.
HMRC’s powers of ‘distraint’ allow it to remove goods and assets such as IT equipment, machinery, vehicles and stock. T
These assets are then taken to public auction and sold off to settle unpaid tax bills. HMRC guidance states that it will start the distraint process ‘as soon as possible’ once it has written to the companies concerned.
The real worry for SMEs is the fact HMRC is only concerned with recouping the tax arrears and not achieving the best price for the assets. The true value of the assets seized far outstrips the outstanding tax bill as the assets are sold for a fraction of their original cost. If that wasn’t enough of a deterrent, HMRC will then take the business to court if it fails to raise enough money to cover the bill.
The HMRC Distraint Process
HMRC as creditors has the power to seize goods without having to go to court. This means tax arrears are very easy to pursue in this way, making distaint more straightforward than many of the other debt collection procedures available. The seizing of assets can also interfere with any rescue package when there is a need to sell the company assets in a pre-pack.
If you have tax arrears, the likelihood is that your business is insolvent and in the midst of serious cash-flow problems. HMRC is aware that the returns it is likely to receive if the company was liquidated will be minimal. Instead, it acts quickly to seize goods while the business is afloat.
To seize goods from your premises, HMRC must first issue a distraint order notice. To do this, an HMRC officer will visit your business, without notice, to discuss the money you owe. They will take an inventory of your business assets and issue the distraint notice for you to sign. This notice will inform you that you have 5 days to settle your arrears before the assets are seized and sold at auction. At this point, you will be left with a ‘controlled goods agreement’, which prevents you from disposing of the assets subject to distraint.
If an HMRC officer comes to visit you at your premises?
HMRC does not bluff when it comes to the seizure and sale of goods. If you have been threatened with a distraint order, then it’s essential you act and seek professional advice immediately.
If an HMRC officer comes to visit you at your premises, make sure you meet them outside of the building. HMRC cannot force entry without a magistrate’s warrant, so this can delay them temporarily. This buys you a very short window of time to seek professional help. Even if the HMRC officer does gain access to your premises to prepare an inventory, simply refusing to sign the inventory may buy you some time to seek assistance.
If it gets to the point that your assets have been distrained, at least five days must pass before the bailiff can attend to remove the goods. Even at this point, it is still possible to salvage the situation by negotiating with the bailiff to make a payment on account and extend the distraint.
How can we help?
If your business is facing an HMRC distraint order, then you either have failed to keep up with a previous Time to Pay arrangement or have simply ignored previous warnings.
The important point to take from this post is that almost any situation you find yourself in HMRC is salvageable if you seek professional help. Like any creditor, all HMRC wants to do is recoup the money it is owed in the simplest possible way. This means that you can still protect your business.
At Jameson, Smith & Co, we can help you explore alternative funding arrangements or act on your behalf to negotiate with HMRC to allow you to clear your arrears over the next 12 months. For free, no-obligation advice, please call our directors’ helpline now on 08000 746 757.