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HMRC internal manual

Debt Management and Banking Manual

Enforcement action: distraint: general considerations: retention of title in goods

Where goods are subject to a ‘retention (or reservation) of title’ (ROT) clause, it means the supplier retains the right to repossess the goods at any time until the buyer has paid for them. This right generally only extends to the goods whilst they are in an unchanged state and have not undergone any processing.

For example, where a manufacturer (seller) supplies cloth to a tailor (buyer) once the tailor converts this cloth into garments other elements have come into the process (buttons, zips, lining, which may all come from another supplier, plus labour costs). This changes the nature of the cloth, and the manufacturer loses title to it.

Therefore if, in this example, you propose distraining on a debtor who is a tailor you may distrain on made-up garments but accept that retention of title remains (if claimed) on any cloth still in its original state and you may not seize the cloth.

Sometimes, however, a clause is inserted into the ROT agreement which attempts to extend the suppliers right to title over the changed article. If exceptionally you come up against such a claim obtain a copy of the agreement and contact your technical manager for advice.

If a supplier claims an ‘all moneys (or monies or sums)’ clause exists and asserts it extends to all goods supplied, including those already paid for, obtain a copy of the agreement and ask the supplier to advise you which clause or section of the agreement he is relying on.