Distraint Orders: What You Need to Know

If you have received a Notice of Enforcement, you have probably been ignoring HMRC letters for 90 days or more. The countdown on that notice, at least 14 clear days, is the last formal warning before an enforcement agent can take control of your company’s goods.

The word “distraint” is what HMRC themselves still use, but in England and Wales the modern regime is the Taking Control of Goods process under Schedule 12 of the Tribunals, Courts and Enforcement Act 2007. The mechanics, the fees, the exempt goods, the agent’s powers, all of it shifted in April 2014. If you have been told the old rules, you are operating on outdated assumptions.

Below, we walk through what happens between the Notice of Enforcement and the goods being sold at auction, what fees crystallise at each stage, what the agent cannot take, and what to do if the notice is already on your desk.

The £1,500-2,500 of statutory fees that get added to a £10,000 HMRC debt is the number nobody talks about until it’s too late to negotiate, so we lead with it.

Understanding Distraint and the Taking Control of Goods Process

“Distraint” is the old name. In England and Wales, from April 2014 the legal framework changed to the Taking Control of Goods regime under Schedule 12 of the Tribunals, Courts and Enforcement Act 2007 (TCEA), with operational detail in the Taking Control of Goods Regulations 2013 and the Taking Control of Goods (Fees) Regulations 2014.

The modern process has three statutory fee stages:

Stage	Fee	When charged
Compliance	£79	Once the debt is passed for enforcement and the Notice of Enforcement is sent
Enforcement	£247 + 7.5% of the debt above £1,900	On the first agent visit
Sale or disposal	£116 + 7.5% of the debt above £1,900	When the agent attends to remove goods for sale

The percentages compound. A £10,000 HMRC debt that runs all the way to sale typically adds £1,500-2,500 in agent fees on top of the original amount; the debtor pays the agent’s costs.

The Notice of Enforcement under Schedule 12 paragraph 7 TCEA 2007 is the formal opening. Since 1 May 2026 it must give at least 14 clear days, not counting Sundays, bank holidays, Good Friday or Christmas Day. Unless a court orders a shorter period, the agent cannot take control of goods until those days have passed.

Step-by-Step: What Happens During the Distraint Process

The process runs in four stages:

Stage 1: Notice of Enforcement (NOE). HMRC’s enforcement agent sends the NOE; typically by post to the registered office. The notice must give at least 14 clear days before the agent can take control of goods. A compliance fee of £79 is already due once the debt is passed for enforcement. This is the cheapest stage to resolve the issue.

Stage 2: First visit. Agent attends business premises. Peaceful entry only at this stage, unless a court has issued a warrant allowing force. Once goods at business premises are under control and still there, the agent may use reasonable force to re-enter for them. Homes are treated differently. The agent identifies goods, lists them, and offers a Controlled Goods Agreement (CGA).

Stage 3: Controlled Goods Agreement OR removal. Under Schedule 12 paragraph 13 TCEA 2007, a CGA is a written agreement that lets the company keep custody and use of the goods while it acknowledges that the agent has taken control of them. CGA gives 7+ days to settle or arrange TTP.

If you do not sign a CGA, the agent may secure the goods or remove them, and the sale or disposal fee (£116 + 7.5% of the debt above £1,900) is added once removal for sale starts.

Stage 4: Auction sale. Removed goods cannot normally be sold until at least 7 clear days after removal, unless they would perish or lose most of their value by waiting. The sale or disposal fee of £116 + 7.5% of the debt above £1,900 applies. Proceeds settle the debt + fees; surplus (if any) returned to debtor.

Your point of decision is between Stage 1 and Stage 3. Once removal happens, the cost-of-cure rises sharply and the practical control over what happens next leaves you.

Directors’ Rights and Obligations During a Distraint

The agent’s powers are real, but limited. The usual £1,350 exemption for tools and equipment of the trade does not apply when HMRC takes control of goods, and it does not protect equipment owned by a company. What the agent cannot take is goods that belong to someone else:

• Third-party-owned goods, with proof; HP vehicles, leased equipment, retention-of-title stock that has not yet vested in the company

If the agent does not accept your evidence that goods belong to someone else, the owner can ask the court to decide under Civil Procedure Rules Part 85. Practical preparation: photograph and inventory anything you expect to claim as exempt, keep supplier finance agreements + delivery notes + retention-of-title contracts accessible.

Director rights:

• See identification; ask the officer to show evidence of identity and of the authority to act
• Challenge under Sch 12 para 66 TCEA 2007; if the agent breaches the rules, the company can bring court proceedings for the loss caused
• Third-party claim under CPR Part 85; a third party who owns goods taken into control can claim them, starting with notice to the agent within 7 days of removal
• Vulnerability; tell the officer and HMRC about any serious health condition or recent bereavement. It can lead to the case being paused or referred back, but it does not stop enforcement automatically

Director obligations are basic civility: allow peaceful entry to business premises (once goods there are under control, the agent may use reasonable force to re-enter; before that, force needs a court warrant), do not move or hide listed goods (an offence under Schedule 12 paragraph 68 TCEA 2007 to interfere with controlled goods), produce evidence of exempt-goods status if claimed.

How to Respond to a Notice of Enforcement

The NOE notice period, at least 14 clear days, is the cheapest stage at which to resolve the issue. Numbered immediate sequence:

1. Verify the debt. Check the HMRC reference number against your Business Tax Account. Confirm the amount is correct and that the underlying assessment is valid.
2. Pay in full if possible. The cheapest option; £79 Compliance fee only, no further escalation.
3. Call BPSS within 24 hours on 0300 200 3835 to negotiate Time to Pay. BPSS (now called the Payment Support Service) deals with businesses that cannot pay on time. How long an arrangement runs depends on what HMRC decides the company can afford. This routes the case off the enforcement track.
4. Don’t call HMRC Debt Management (0300 200 3887) instead. Debt Management handles enforcement-track cases, and calling them at NOE stage reinforces the enforcement framing.
5. If amount is unmanageable, instruct an insolvency practitioner within 48 hours. The IP diagnostic call is free industry-wide; cheapest insurance against escalation.

The routing logic matters more than directors realise. In our casework, BPSS treats the case as “the company wants to pay but cannot pay now”; Debt Management treats the case as “the company has been pursued and has not paid.” We see the same call to different numbers produce materially different outcomes.

Avoiding the Serious Consequences of Full Enforcement

In our experience, the agent visit is the end of one process and the beginning of another. A TCoG enforcement is rarely an isolated event; it usually signals broader insolvency.

A visit from HMRC’s officers plus arrears across several taxes (CT, VAT, PAYE) is a strong sign that the company cannot pay its debts as they fall due, the cash-flow test in section 123(1)(e) of the Insolvency Act 1986. Once at this point:

• s.214 wrongful trading exposure. Continuing to trade after the distraint visit + accumulating new credit creates evidence for a future liquidator’s contribution-order claim. The “every reasonable step to minimise creditor loss” defence under s.214(3) becomes harder to maintain.
• Winding-up petition is likely next. HMRC regularly presents winding-up petitions on the ground that a company cannot pay its debts (s.122(1)(f)).
• Bank freeze risk. Once a petition is presented, Gazette advertisement triggers proactive bank freeze under s.127 IA 1986 voidance risk.

Our advice is rarely “ride this out”: engage a licensed insolvency practitioner before the next escalation step. A pre-petition CVL costs £4-7k for a typical SME and preserves your control over IP choice.

A compulsory liquidation after petition is no direct cost to you, but the Official Receiver investigates the directors’ conduct, which can lead to disqualification proceedings. The earlier you engage us, the wider your option set.

Seeking Professional Help When Distraint Is Imminent

Two categories of professional advice matter:

Licensed insolvency practitioner; for assessing the company’s overall position. Many insolvency practitioners, including us, offer a free first call. Verify the IP’s licence on the ICAEW register or the IPA register. The IP confirms whether the company can survive the distraint or whether formal procedure is needed.

Specialist tax + insolvency lawyer; for disputed HMRC assessments. Tier 1 tax chambers (11KBW, Pump Court Tax Chambers, 11 New Square) handle First-tier Tribunal appeals + judicial review of HMRC decisions. Typical retainer £15-50k for complex cases; £2-5k for routine appeal preparation.

The cost-benefit framing for SMEs:

• £4-7k SME CVL + IP diagnostic call now
• vs £1,500-2,500 enforcement fees + petition + Schedule 1 CDDA disqualification investigation
• vs £30k-100k+ wrongful trading contribution order if liquidator finds the director traded on past point-of-no-return

The IP diagnostic is free. There is no cost saving from delaying it.

FAQs on Distraint Order Notices