HMRC restarts direct recovery of tax debts from bank accounts
HMRC has resumed use of its Direct Recovery of Debts (DRD) powers, enabling it to recover unpaid tax directly from the bank accounts of businesses and individuals who have ignored repeated attempts to settle outstanding liabilities. What does this mean in practice for business owners and directors?
In an updated briefing, HMRC confirms that it has re-started the use of DRD, which was paused during the coronavirus pandemic and is now being operated in a “test and learn” phase. Under the policy, HMRC can require banks and building societies to pay sums directly from taxpayers’ accounts where tax debts of £1,000 or more are owed and the debtor has the means to pay but has consistently refused to do so.
HMRC emphasises several safeguards before direct recovery is considered. These include ensuring that:
- the debt is established and past any appeal deadline;
- multiple contact attempts have failed; and
- the taxpayer receives a face-to-face visit from HMRC agents to confirm the debt and explore repayment options such as a time-to-pay arrangement.
Where DRD is pursued, HMRC must also leave a minimum of £5,000 across the debtor’s accounts so that funds remain available for essential business and personal expenses. Taxpayers have a 30-day period to object once the DRD process begins, and there is a right of appeal to a county court on specified grounds including hardship. For business owners, the re-introduction of DRD underscores the importance of engaging early with HMRC over any unpaid tax bills. Ignoring correspondence or deadlines can escalate enforcement activity, even where a formal payment plan might have avoided direct recovery action.
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