HMRC taking control of goods is the legal process, formerly called distraint, where HMRC-authorised enforcement agents visit a business to seize goods that can be sold to recover unpaid tax. It follows a formal warning and gives HMRC the right to remove and sell assets such as vehicles, machinery or stock if the debt stays unpaid.
For a director, the process can feel sudden, but it follows set legal steps with fixed timings and fees. Understanding what enforcement agents can and cannot take, and what a controlled goods agreement actually commits you to, makes it easier to decide what to do next.
What Taking Control of Goods (distraint) means
Taking control of goods is the modern legal term for what used to be called distraint. It is set out in Schedule 12 of the Tribunals, Courts and Enforcement Act 2007 and lets HMRC recover unpaid tax by seizing and selling a debtor's goods, rather than going straight to court.
HMRC only uses this route after sending a formal demand and, in most cases, a further notice of enforcement giving at least seven clear days' warning before an agent can visit. This notice period is meant to give the business a genuine opportunity to pay or agree a plan.
An enforcement agent (sometimes still called a bailiff) acting for HMRC must show identification and evidence of authority. They can enter through an unlocked or open door but cannot normally force entry on a first visit for most tax debts.
What assets HMRC can and cannot seize
HMRC can take control of goods that belong to the business and have a resale value. In practice this often includes:
- Company vehicles, provided they are not on finance or under a genuine third-party claim
- Office and workshop equipment, machinery and tools
- Stock and saleable inventory
- Furniture, fixtures and other business assets held outright
Certain items are protected. HMRC cannot generally seize:
- Items on hire purchase, lease or genuine third-party ownership where title has not passed to the business
- Equipment reasonably needed to continue trading, up to a value HMRC considers necessary
- Goods already subject to another creditor's prior legal claim
- Perishable goods in some circumstances
Leased or financed equipment is a common source of confusion. If the finance company still owns the asset, HMRC's enforcement agent should not remove it, but the business needs evidence (a finance agreement) ready to show at the visit.
The controlled goods agreement explained
A controlled goods agreement is a written agreement signed with the enforcement agent that lists specific goods and lets the business keep using them, on the understanding that HMRC now has a legal claim ("control") over them. It is often presented as a way to avoid immediate removal.
Signing one means:
- The listed goods cannot be sold, moved or disposed of by the business without HMRC's agreement
- A payment plan is usually attached, with instalments to clear the debt
- If a payment is missed, the agent can return and remove the goods without further notice, because control was already taken
Directors should read a controlled goods agreement carefully before signing. It is a binding commitment, not a formality, and missing even one instalment can lead straight to removal and sale of everything listed.
Fees added during the enforcement process
Enforcement fees are fixed by regulation and added to the debt at each stage, increasing the total owed:
- A compliance fee once the enforcement notice is issued
- An enforcement fee when the agent first visits to take control of goods
- A sale fee if goods are later removed and sold, plus a percentage of amounts recovered above a set threshold
These fees are added regardless of the size of the underlying tax debt, so smaller debts can see a proportionally large increase once enforcement starts. HMRC sets out the current fee bands in its guidance on what happens if you don't pay your tax bill. Paying promptly, or agreeing terms before the agent's visit, avoids the later-stage fees.
How to stop or pause the process
The process can usually be stopped or paused at more than one stage:
- Before the visit: paying the debt in full, or agreeing a Time to Pay arrangement with HMRC, should prevent enforcement proceeding
- At the door: a genuine, evidenced dispute about the debt, or proof that goods are leased or financed, can be raised with the agent
- After a controlled goods agreement: keeping to the agreed instalments keeps the goods in the business's use
- Wider financial difficulty: where enforcement is one symptom of broader company insolvency, a formal insolvency process may address the whole debt position, not just this one enforcement action
If the company owes HMRC and is struggling generally, it is worth reading about the full range of options when you owe HMRC and can't pay, since taking control of goods is often one part of a wider enforcement picture rather than an isolated event.
What happens if goods are removed and sold
If payment is not made and no agreement is reached, the enforcement agent can return to remove the controlled goods. They are then sold, typically at public auction, and the proceeds go toward the debt plus the fees added during the process.
Any surplus after the debt and fees are paid should be returned to the business. If the sale does not raise enough to clear the debt, HMRC can pursue the remaining balance through other routes, including further enforcement action or, in serious cases, a winding-up petition, which would be advertised in The Gazette's insolvency notices.
Taking control of goods sits within HMRC's broader debt enforcement process, and a visit from an enforcement agent is often preceded, or followed, by other contact. It can help to understand what a HMRC field force visit typically involves, since some directors encounter that stage first.
Frequently asked questions
Can HMRC take goods that are on lease or finance?
No, not if the finance company still legally owns the asset. The business should have the finance agreement available to show the enforcement agent, as goods under genuine third-party ownership fall outside HMRC's power to seize.
Will HMRC take equipment I need to keep trading?
HMRC's guidance recognises that some tools and equipment are reasonably needed to continue the business, up to a value it considers necessary. This is assessed case by case, so it is worth raising directly with the agent or HMRC.
How much notice does HMRC give before taking control of goods?
HMRC must normally send a notice of enforcement giving at least seven clear days' warning before an agent's first visit, following an earlier formal demand for the debt.
Can I still trade normally after signing a controlled goods agreement?
Yes, day-to-day use of the listed goods usually continues, but they cannot be sold, moved or disposed of without HMRC's agreement, and missing an instalment can lead to removal.
Does taking control of goods mean the company is being wound up?
Not directly. It is a separate enforcement route for recovering a specific debt. However, if the underlying tax debt remains unresolved, HMRC can escalate to other action, including a winding-up petition.
This article is general information about HMRC's taking control of goods process and is not legal, financial or insolvency advice. Every company's circumstances are different, and directors should speak to a regulated specialist about their own situation.
If you would like to talk through what enforcement action means for your business, Harbourfirst can introduce you to a regulated insolvency specialist — start an enquiry.