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HMRC internal manual

Debt Management and Banking Manual

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HM Revenue & Customs
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Enforcement action: distraint: carrying out a distraint: levying distraint

Having confirmed the defaulter is aware of the debt and demanded payment, if the debtor does not pay in full, you should levy distraint.

You should levy for the full amount outstanding (this will be the amount demanded less any payment on account accepted immediately before distraint commences).

Interest accruing

Where the debt attracts interest make it clear to the defaulter that interest is accruing daily and will continue to do so within the distraint until payment is made. The amount payable under the distraint therefore increases from day to day.

Sufficient goods

You should seize sufficient goods to recover

  • the amount of the debt and 
  • all the costs that might be incurred in removing and selling them.

Make sure you have visited all parts of the premises to seek out goods.

It is not easy to predict how much some goods will realise at public auction. Sometimes goods that appear valuable will fetch only scrap value and the cost of removing and selling large items can be much greater than you think. So make sure you seize sufficient goods to allow for this.

Be careful not to seize more goods than will clearly satisfy the debt and costs. It is an offence to levy excessively, but the appraisal which you must carry out before sale will identify that possibility and you should release goods over the value you expect to realise.

If only a single, high-value item is available amongst other lesser items, seize that single item. However, there is always the possibility that a single item, such as an antique, for example, might turn out to be fake or have to be released following a successful third party claim. With this in mind, where you levy on such an apparently worthwhile asset consider where possible also seizing another item so that your costs will be covered in the event that the main asset has to be released.

Normally, goods are worth more to the debtor than they will realise at auction, because the debtor will be considering their replacement value and this is a clear incentive for them to pay the debt.

Direct/indirect tax debts

Where you have both direct and indirect tax debts you will levy for the larger debt only. Direct and indirect taxes cannot be included in the same levy. However, in the very exceptional circumstances that you consider there are more than enough assets to realise sufficient, at public auction, to cover all the costs and tax etc liabilities for the larger debt and a surplus of goods remain unseized you may conduct a separate levy for the lesser debt, although this will impose two sets of costs on the defaulter.

You cannot levy against goods for the two separate debts on a pro rata basis.

Insufficient goods

You may still levy distraint even if there may not be enough goods to cover the full amount of the debt and the costs incurred, provided that you have seized all the goods available for distraint and in the event of a sale, all the costs and a proportion of the debt will be cleared.

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Assessing costs

In order to assess the potential costs when considering the realisation value of goods you are levying on you will need to be familiar with your auctioneer’s ‘reasonable’ rate for appraisal, removing and storing goods and advertising costs (DMBM656020).

Objection to costs

If the defaulter objects to costs charged during a distraint action you should draw their attention to:

  • SI1994/236: The Distraint by Collectors (Fees, Costs and Charges) Regulations 1994 and SI1995/2151: The Distraint by Collectors (Fees, costs and charges) (Amendment) Regulations 1995 for direct taxes and
  • S1 1997/1431 Distress for C & E Duties etc. Regulations, Schedule 2 ‘Scale of Costs for indirect taxes.