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Before 6 April 2014, if you had not paid all your tax liabilities on time the tax system gave HMRC the power to take goods owned by the tax payer and sell them at public auction, with the proceeds being used to settle the debt (including interest and penalties) and costs associated with the action.

HMRC did not need a Court Order to proceed in this way and bailiffs would be called in to take control of goods owned by the tax payer to be sold at public auction.

From 6 April 2014, the powers still remain but there has been a change in terminology; an increase in fees and a reduction in the value of protected assets.

As before, no Court intervention is needed but the term of “distraint” has been changed to “taking control of goods”, with bailiffs now being called enforcement officers.

Notice and Entry

The debtor now needs to be given at least 7 days’ notice before the enforcement officer may visit premises providing them with more opportunity to seek an agreement with HMRC.

As before, the officer cannot make a forced entry without a Court Order but they can now only enter the premises through a door, whereas previously they could enter through an open window.  Working hours have also been extended to 7 days a week, excluding major public holidays.

Fee Structure

Previously, as long as the bailiff was paid in full before he began examining goods, no additional fees were charged.  Once he began completing Form C204 (listing the debtor’s assets) a minimum fee of £12.50 was due, plus a percentage of the debts in excess of £100.

Under the new rules, a minimum fee of £75 is due even if the debt is paid in full before the officer takes further action.  Once enforcement is underway, a minimum fee of £235 is then charged, together with a percentage of the outstanding debt.

Protected Assets

It appears that the instruction not to remove jointly owned assets still remains but this is an issue that may require monitoring.

Further, whilst bailiffs were instructed not to remove “tools of the trade”, enforcement officers only have to exclude tools to the value of £1,350 and so this may mean that, in many cases, vehicles needed to transport goods or to travel to and from work will no longer be protected if they are worth more than £1,350.  Other categories of protected assets, such as basic household items, remain as before.

The changes only increase HMRC’s powers to settle outstanding tax debts.  It is also highly likely that their power will increase further if they are able to seize funds directly from a tax payer’s bank account from April 2015, as currently proposed.

If you have any difficulty in settling your tax debts on time, you should ensure that HMRC are fully aware of your position and you should try and put a payment plan in place wherever possible.  If we can help further in this, please do get in touch.

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