Tax and Debt: What is Distraint ?

The term “distraint” refers to the legal process whereby Inland Revenue takes over your possessions and sells them at an auction in order to settle an unpaid tax bill. Unfortunately, Inland Revenue has the right to do this without having to procure a court order. The period between which the collector visits and the goods are removed to be sold is only five days. The process of distraint involves a myriad of costs that are ultimately the taxpayer’s burden. They become part of the debt and are paid first from the proceeds of any sale, before the original debt itself.
In Scotland, distraint is known as a “Summary Warrant.” Despite the different name, the process is much the same.

If you are heavily in debt, it is important to be mindful of the possibility of distraint. You should, however, keep a few things in mind. First off, you should remember that distraint is a legal process – and that the collector must act within the bounds of the law. Bailiffs occasionally use distraint illegally in order to care for other debts, so beware.

You should also keep in mind that the collector is not allowed to force their way on to your property without first getting a court order. Such court orders do exist, but they are highly unusual and hard to get.

Finally, only less than one percent of distraint visits will actually lead to auction sales.

A visit from the collector.

 

Distraint collectors are bound by certain rules. They are allowed to visit any day except for Sunday and public and bank holidays. They may come at any time between sunrise and sunset. Typically, you will have been warned in advance about the distraint visit – although the collector is not required to make an appointment and can thus turn up at any time, as designated above. A private bailiff might accompany the collector. This bailiff will not have any legal powers against you – they are most likely there to advise the collector on the value of your belongings.

Entry to your premises

 

Before the distraint process can begin, the collector will have to enter your home or business. This has to be a peaceful entry, according to the law. The only way the collector is able to make a forced entry is in the event that he is in possession of a court order – and these court orders are highly unusual. By denying entry to the collector, you are not putting an end to the distraint process. You can buy yourself time that way, however. Once the collector gains access to your premises, you will be informed what tax is owed and you will then be given a chance to pay it. If you do not present him with payment, then seizure of your belongings may begin.

Seizure

 

Once the seizure process begins, the collector will look around your property and begin making notes as to what you own and what might be sold at auction. This list is called a distraint notice and inventory. Usually, the goods will not be removed at this time. You will, however, be asked to sign an agreement known as a walking possession agreement. Under this agreement, you are given five days’ time to either settle the tax or make an acceptable payment offer. If you do not succeed in doing either in the allotted time, then the collector can return and collect the goods that have been stipulated on the distraint notice and inventory for sale at auction. Once you have signed this agreement, you are not allowed to sell or remove any of the items that are listed there.

Goods which should not be seized

 

There are certain types of goods that are considered to be exempt from distraint. For example, if a piece of property in your home belongs to someone else or is jointly owned, they cannot seize it. Perishable food, clothes, beds and bedding, basic cooking equipment, and basic furniture cannot be seized. Livestock and the necessary tools for your trade are also exempt from distraint. Other items that are forbidden from seizure include the following:

• 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

When a collector visits you, he will typically be looking for valuable items such as antique furniture, motor vehicles, and works of art. If you do not own such goods, then you can allow the collector in to your home knowing full well that there is nothing there worth seizing.
A distraint collector may also visit your business. He is not allowed to put you out of work by seizing the necessary tools of your trade – these items are all exempt from seizure. The collector may, however, seize trading stock, which can be very damaging to your business.
In the event that a collector seizes an asset that you believe to be exempt, you should complain immediately, as he is breaking the Revenue’s Service Commitment. You should make sure your letter of complaint is marked “urgent,” and make sure you send a copy to the collector as well, asking him not to take further action until the necessary authorities have addressed your complaint. In such an event, your complaint should be handled rapidly.

Vehicles

Usually, the most common asset seized in distraint is a vehicle. You should thus figure out right away if your vehicle is necessary for your business or not.