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HMRC internal manual

Debt Management and Banking Manual

From
HM Revenue & Customs
Updated
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Enforcement action: distraint: after the levy: offences connected with distraint

There are many offences connected with distraint and any party can commit them.

Forexample, the distrainor will commit an offence if the distraint is either:

  • illegal (if it was wrongful from the outset)
  • irregular (if the levy was carried out correctly but the distrainor does something unlawful afterwards such as failure to release the goods on tender of payment of the debts and costs).

The aggrieved party may sue the distrainor for damages for these offences.

You should be conscious of the risks involved and seek advice from your technical manager if you think that your actions may be challenged.

Debtors can also commit offences, usually involving interference with distrained goods, and it is worth mentioning just two.

Pound breach

If a person (whether or not they are the debtor) knowingly removes or disturbs distrained assets without your permission they may be guilty of pound breach and possibly also breach of Walking Possession. This breach can include an insolvency practitioner who disposes of goods, often as part of a sale of the business, where a levy is in place prior to his appointment. The distrainor is entitled to recover the goods or to sue for damages.

Breach of walking possession

Similarly, a debtor who has entered into a Walking Possession agreement and knowingly breaks its terms, is in breach of the agreement and the distrainor is entitled to sue for damages (see also DMBM655740 where access to distrained goods is prevented).

Indirect taxes

S68 VAT Act 1994 provides that penalties, equal to 50 per cent of the amount for which distress was levied, may be imposed against anyone who breaches a Walking Possession arrangement for indirect taxes only (a suitable warning appears on form C204a).

Title to distrained goods

Title to the distrained assets remains with the defaulter until sale at public auction. The goods do not, at any stage, belong to the Department so the goods have not been ‘stolen’ from the Department (see the Note at DMBM655030).

Breach is not a criminal offence but a civil offence (tort).

You can minimise the risk of either offence by taking sufficient measures to ensure that you have possession of the goods at all times.