20th April 2021
A Notice of Enforcement, previously known as a Distraint Order Notice, can be served on you by creditors in order to recover monies owing to them. Although any creditor can serve a Notice of Enforcement, all apart from HMRC and landlords have to go through the courts in order to obtain one.
HMRC tend to use this route to deal with companies reluctant to pay taxes owed, and it is highly likely that you will already have received correspondence from them in regard to unpaid liabilities.
Being in receipt of a Notice of Enforcement is a serious matter. It must be acted upon quickly, otherwise goods may be seized via a Controlled Goods Agreement, so taking action as soon as the Notice is served should be a priority.
Before we discuss what to do, let’s take a few steps back to examine the reasons why this stage has been reached, taking HMRC as an example creditor.
This is a common scenario prior to an Enforcement Notice being served:
This all means that the arrival of an HMRC officer at your premises may not come as a complete surprise, but an Enforcement Notice is not something that can be put aside, as we explain below.
An HMRC Enforcement Agent will visit company premises to discuss the debt, and serve you with the Enforcement Notice which gives you seven clear days (excluding Sundays and Bank Holidays) to take action.
The debt must either be paid in full, or an instalment plan negotiated and agreed with HMRC, otherwise the Enforcement Officer will return to take control of goods to be sold at public auction.
HMRC may appoint bailiffs to carry out this procedure, whereby they have legal entry to fully commercial premises. If your premises are part or fully residential, access is limited to the normal routes.
Assuming that the debt has not been paid to the Enforcement Agent, a Controlled Goods Agreement (previously known as a Walking Possession Agreement) is made up which lists the goods to be taken for sale. This procedure was formerly called ‘seizure,’ but ‘taking control of goods’ is the term now used.
If the Controlled Goods Agreement is signed, the company is given a further seven days in which to pay in full, after which time the goods listed in the Agreement will be taken and sold. By signing the agreement, you are also agreeing to allow an officer to inspect or take the goods at any time.
If the Controlled Goods Agreement is not signed, arrangement may be made to remove the goods immediately. It should be noted again that bailiffs are not allowed to enter fully or part residential premises by any other means than the normal entry routes. Forced entry is only allowed into commercial premises.
Any goods listed on the Agreement cannot be sold independently by the directors - indeed it is a criminal offence to do so. These goods have been earmarked for sale in a private auction and must not be disposed of in any other way.
You can pay the debt in full, or you may be able to negotiate a Time to Pay arrangement with HMRC. This would involve paying the full tax bill, but over a longer period – usually between three and six months.
It is a good idea to approach a licensed insolvency practitioner at this point as you will gain access to professional advice and guidance that helps you avoid further trouble with HMRC. An IP can negotiate all arrangements on your behalf, making the process a little less stressful, as well as potentially saving you money and keeping the business going if it is considered viable.
If, after reviewing your position, the insolvency practitioner believes that the company could be made profitable, there may be several options open to you, including a Company Voluntary Arrangement or Administration.
These are commonly used insolvency procedures offering an escape from creditor pressure, and although they may not be suitable in all cases, provide an alternative route for some companies.
Unfortunately, the resounding answer is “Yes.” HMRC are clamping down on companies that owe taxes, but are inclined to differentiate between those who cannot pay and those that simply will not pay.
They are serious about forcing the latter group to pay their taxes in full, and are prepared to take stringent measures in order to bring this about. Although they are responsible for issuing the Enforcement Notice, they may employ a debt collection company or firm of bailiffs to take control of the goods.
It is also worth remembering that an Enforcement Notice doesn’t have to be delivered in person. It may arrive through the post, by email or fax – you may even find it attached to the outside of your premises if there is no letterbox. If it is delivered in person by an HMRC Enforcement Agent, they will carry an appropriate identity card.
It is recommended that you check any notice of action from HMRC for mistakes or errors in the way it was delivered, or the timescale provided for action. It is assumed that the amount owed will have already been disputed if this is in question, as there should already have been several attempts by HMRC to collect the money.
If you are in any doubt about the validity of any notices, we can advise and support you in making a query. If anything is found to be incorrect, action will be postponed until a new Notice is issued.