HMRC distraint and Taking Control of Goods: A UK director's guide

HMRC distraint in England and Wales is now the statutory "Taking Control of Goods" procedure under Schedule 12 of the Tribunals, Courts and Enforcement Act 2007 ("TCEA 2007"). The procedure replaced the pre-existing common-law distraint power on 6 April 2014. The shift was substantive rather than cosmetic — the new framework introduced standardised fees, prescribed time periods, vulnerable-persons protections, and a more structured set of debtor remedies. HMRC continues to refer internally to the procedure using the acronym "TCoG".

HMRC enforcement under TCoG is identical in structure to enforcement by any other creditor under a writ or warrant of control — the same statutory framework, the same fees, the same exempt-goods categories, the same procedural protections. What is different is HMRC's standing: as a Crown creditor with statutory authority to enforce unpaid tax, HMRC does not need to obtain a court judgment before instructing enforcement agents. This makes HMRC's enforcement faster than commercial enforcement — there is no judgment phase — but the procedural framework once enforcement begins is the same.

The HMRC Field Force visit spoke covers the visit that precedes Notice of Enforcement; this guide picks up from the Notice.

Schedule 12 TCEA 2007

Schedule 12 to the Tribunals, Courts and Enforcement Act 2007 is the principal statutory authority. It sets out the basic structure of the Taking Control of Goods procedure: who may use it, the meaning of "goods" and "debtor", the requirement for notice before goods can be taken into control (paragraph 7), the standards for binding goods, valuation requirements (paragraph 36), and the framework for sale. Many of the operational details are then set out in the secondary regulations.

Taking Control of Goods Regulations 2013

The Taking Control of Goods Regulations 2013 (SI 2013/1894) supplement Schedule 12. The most operationally important regulations are: regulation 6 (Notice of Enforcement — minimum 7 clear days); regulation 7 (form and content of the Notice of Enforcement); regulation 10 (specific exemptions); regulation 13 (permitted hours — 6am to 9pm any day, with exceptions); regulation 19 (removal of goods); regulation 25 (forceful re-entry — minimum 2 clear days' notice); and regulation 30 (Notice after Entry — the document that incorporates the walking-possession agreement, often referred to as the C204 form).

Taking Control of Goods (Fees) Regulations 2014

The Taking Control of Goods (Fees) Regulations 2014 (SI 2014/1) set out the fee structure. The standard fees apply at three stages — compliance, enforcement, and sale — with provision for an additional percentage fee on amounts above specified thresholds (regulation 7). Regulation 12 contains the vulnerable-debtor protection: where the debtor is a vulnerable person, enforcement-stage fees are not recoverable unless the debtor has been given an opportunity to obtain advice.

Recent Ministry of Justice consultation outputs (2023–2025) have proposed amendments to the regulations — including potential changes to the minimum notice period and a 5% uplift to the fees, the first since 2014. Practitioners should monitor these developments; the current spoke reflects the framework as in force at last review.

Exempt goods under Schedule 12 and the 2013 Regulations

Generally, any goods belonging to the debtor can be taken into control unless they are "exempt goods". The principal exemptions for trading companies:

• ›Tools, books, vehicles, and other items necessary for the debtor's personal use in their employment, business, trade, profession, study or education, up to an aggregate value cap (the cap is set in the Regulations and should be verified against the current rate before publication).
• ›Items necessary for the basic domestic needs of the debtor and their family — though for company debtors trading from commercial premises, this exemption is rarely engaged.
• ›Goods on premises that the enforcement agent does not have power to enter.
• ›Items that would breach the peace if taken (in particular, items in active use at the moment of seizure — regulation 4(1) 2013 Regulations).

Most operational equipment, stock, vehicles, and tangible business assets of a trading company are not exempt and are available for seizure. The tools-of-the-trade exemption applies to items necessary for the debtor's personal use — it is interpreted narrowly for incorporated debtors and rarely covers material business assets.

Goods not owned by the company

Goods not owned by the debtor cannot be taken into control. The most common categories:

• ›Goods subject to hire purchase, conditional sale, or finance lease — title remains with the financier until the contract is fulfilled. Where a vehicle is on HP, the enforcement agent cannot seize it, although they may seize the company's equity interest if registered correctly.
• ›Goods subject to a retention of title clause where the supplier has properly perfected the clause and the goods are identifiable.
• ›Trust assets where the whole beneficial interest is not vested in the debtor.
• ›Goods on consignment or held as bailee — title remains with the consignor or bailor.

Documentary evidence of these arrangements should be available for inspection. Enforcement agents will reasonably accept evidence of HP, finance lease, or properly registered RoT clauses; vague or undocumented assertions will typically be rejected.

Jointly owned goods

Where goods are jointly owned, paragraph 50(6)(a) of Schedule 12 TCEA 2007 requires the enforcement agent to pay the co-owner a share of the proceeds proportionate to their interest before applying the remainder to the debt. In practice, enforcement against jointly owned goods is more complex and often avoided where alternative assets are available.

Goods on premises subject to TTP or formal procedure

Where the company is in formal insolvency procedure (CVL, administration, CVA) at the time enforcement is attempted, the moratorium on enforcement under the relevant procedure typically prevents seizure. Where a TTP is in good standing at the time of attempted enforcement, the enforcement should be paused (the visit is typically based on a HMRC processing error in such cases).

This protection is one of the principal commercial reasons for entering formal procedure when distraint is imminent: the moratorium pauses enforcement, protects the asset base, and gives the IP authority to negotiate with HMRC and other creditors on a controlled basis.

The Controlled Goods Agreement (under paragraph 13 of Schedule 12) is the formal mechanism by which goods are taken into control while remaining on the premises. The enforcement agent identifies the goods, lists them on the agreement (the Notice after Entry typically incorporates the walking-possession-style form often referred to as the C204), and the debtor signs an undertaking that the goods will not be sold, moved, or disposed of pending resolution of the debt.

Critical features of the CGA:

• ›The listed goods remain physically on the premises — the company can continue to use them in normal trading.
• ›Selling, moving, or disposing of CGA-listed goods is a criminal offence under paragraph 68(2) of Schedule 12. This is a real and enforced restriction — companies have been prosecuted for asset disposal during CGA periods.
• ›The CGA gives the company a defined period (typically 7 days, depending on the agreement and circumstances) to pay the debt. If payment is made, the CGA is released; if not, the enforcement agent returns to remove the goods.
• ›Where the company breaches the CGA (sells or moves listed goods, fails to allow re-entry as required), the enforcement agent can apply for a court order or proceed directly to forced re-entry under regulation 25 of the 2013 Regulations — which requires minimum 2 clear days' notice unless the court orders otherwise.
• ›If the underlying debt is paid in full during the CGA period (including the fees accrued at all stages reached), the CGA is released and the goods are not removed.

If the CGA period expires without payment, enforcement agents return to remove the listed goods. Removal must follow the procedural requirements of regulation 19 of the 2013 Regulations — in particular, securing the goods at a place within a reasonable distance and providing the debtor with information about sale or disposal. Goods are typically transported to an auction storage facility; storage costs are recoverable from the debtor as a disbursement.

Sale at public auction follows valuation (paragraph 36 Schedule 12 — valuation by the agent or an independent qualified valuer, with the debtor and any co-owner entitled to obtain their own independent valuation). The auction proceeds are then applied in the order specified by regulation 13 of the Fees Regulations: auctioneer fees and the compliance-stage fee are paid first; the remainder is divided pro-rata between the debt and the remaining enforcement-stage and sale-stage fees and disbursements.

Where the auction realisation is insufficient to cover the debt and all fees, the company remains liable for the shortfall. HMRC can then escalate to a Winding Up Petition if the underlying tax debt is not satisfied. By this stage, the company has typically lost both its operational assets and its trading capability — making formal procedure (CVL) the realistic outcome.

Regulation 12 of the Fees Regulations 2014 protects vulnerable debtors. Where the debtor is a vulnerable person, enforcement-stage fees are not recoverable unless the debtor has been given an adequate opportunity to obtain assistance and advice. Additionally, the enforcement agent cannot take control of goods where a child or vulnerable person is the only person present at the premises.

For corporate debtors, the vulnerable-person protections are typically less relevant — they protect natural persons rather than companies. But the protections become engaged where the company's premises are also a residence (home-based businesses, sole-director companies operating from a residential address) and where children or vulnerable adults reside there. Where these factors are present, they should be flagged early in any engagement with the enforcement agent.

Regulation 13 of the 2013 Regulations sets the permitted hours for taking control of goods at 6am to 9pm any day of the week. Exceptions apply by court order or where the premises are open for business during prohibited hours — a 24-hour business cannot resist enforcement during night-time hours by reference to regulation 13.

Pay in full

Paying the debt in full — including all fees accrued to the relevant stage — stops the procedure immediately. Where the funds are available (or can be raised quickly through internal sources, director contributions, or short-term refinancing), this is typically the cheapest option. The compliance-stage £75 fee is unavoidable once Notice of Enforcement is served, but enforcement-stage and sale-stage fees can be avoided by paying before the agent attends.

Negotiate with HMRC Debt Management

Although the case has been instructed to enforcement agents, HMRC Debt Management retains authority to halt the enforcement and agree TTP. This is materially harder than agreeing TTP at the Field Force visit stage — the case has progressed because HMRC concluded that engagement was not forthcoming — but it is not impossible. A credible TTP application supported by realistic financial information, presented promptly through Debt Management or with professional intermediation, can sometimes pause enforcement.

The negotiation must be with HMRC Debt Management, not directly with the enforcement agents — the agents have authority to take control of goods and accept payment, but not to vary the underlying debt or agree TTP terms. Discussions should be parallel: the company engaging Debt Management on TTP while the company's adviser engages with the agent on stay-of-action pending Debt Management decision.

Enter formal procedure (CVL, administration)

Where the company is balance-sheet insolvent or cash-flow insolvent and TTP is not realistic, entering formal procedure produces an immediate moratorium on enforcement. Creditors' Voluntary Liquidation, administration, and Company Voluntary Arrangement each engage moratorium provisions — with administration providing the strongest form of moratorium under Schedule B1 to the Insolvency Act 1986.

The procedural mechanics are time-sensitive but executable within days where the IP is engaged early. CVL can typically be commenced within 5–10 working days of decision. Administration with an immediate moratorium can be initiated by court application or out-of-court appointment by the directors (where qualifying floating charge holder consent or notice is satisfied) — in some cases within hours of decision in genuine emergencies. The IP's authority on appointment supersedes director authority and includes engagement with HMRC and the enforcement agents.

This is one of the principal IQ engagement scenarios. The decision — whether to enter formal procedure — is fact-specific and depends on the underlying solvency position, the asset base, the trading viability, and director-personal exposure. The first conversation typically tests whether formal procedure is the right response and whether the timing window remains open.

Court applications

Court applications under Part 84 of the Civil Procedure Rules and the various paragraphs of Schedule 12 can address specific procedural issues:

• ›Application to suspend enforcement pending dispute or appeal of the underlying debt.
• ›Challenge to specific fees or disbursements claimed by the enforcement agent (regulations 15–16 of the Fees Regulations).
• ›Application for an order regulating the enforcement agent's conduct where there are alleged breaches of Schedule 12 or the 2013 Regulations.
• ›Adverse claims to goods — where third parties claim title to goods listed on a CGA (typically HP financiers, retention-of-title suppliers).

Court applications take time and incur their own costs — they are typically used where the underlying debt is genuinely disputed or where there is a specific procedural defect in the enforcement. They are not a delaying tactic for valid debts.

In many cases, particularly for companies with limited tangible assets (professional services firms, technology companies, businesses with minimal physical equipment), distraint produces minimal recovery and HMRC escalates to formal proceedings. The progression:

• ›Enforcement agents attend, find limited seizable assets, and report back to HMRC.
• ›HMRC concludes that distraint will not satisfy the debt and decides to escalate.
• ›HMRC presents a Winding Up Petition, typically supported by the unsatisfied tax debt and the failure of the distraint procedure.
• ›The petition is heard 8–10 weeks later. Compulsory liquidation follows in many cases, with the Official Receiver appointed.

By this stage, the company has usually incurred enforcement fees, court fees, deposit costs, and the operational damage of visible enforcement — all of which would have been avoided by earlier engagement. This is why the realistic option for asset-poor companies facing imminent distraint is typically formal procedure pre-emption rather than waiting for the procedure to progress through removal-and-sale to inevitable petition.

If a Notice of Enforcement has been served, enforcement agents are imminent, or goods are on a Controlled Goods Agreement, the first step is a conversation with a licensed practitioner. The conversation will assess realistic options at this stage, test whether engagement with HMRC Debt Management can produce TTP or stay of enforcement, evaluate whether formal procedure pre-emption is the better response, and outline the procedural steps required. Decisions are typically required within days. There is no charge for the initial consultation and no obligation arising from it. Confidentiality is absolute.

At IQ Insolvency, every distraint engagement is led by a licensed insolvency practitioner from the first conversation. The IP can engage with HMRC and the enforcement agents directly, implement formal procedure where appropriate (typically CVL or administration with attendant moratorium), and protect director-personal positions during the procedural transition. No call centres. No handoffs. One licensed practitioner, start to finish.

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