HMRC has confirmed the resumption of its Direct Recovery of Debts (DRD) powers following a pause during the COVID-19 pandemic. This development marks a significant shift in HMRC’s approach to collecting outstanding tax debts and carries important implications for individuals and businesses with unpaid tax liabilities.
Understanding Direct Recovery of Debts
Direct Recovery of Debts allows HMRC to recover outstanding tax debts directly from a taxpayer’s bank or building society account, including cash Individual Savings Accounts (ISAs). This power applies where an individual or business owes £1,000 or more and has the means to pay but has refused to do so.
Introduced in 2015, DRD was used sparingly in its initial years. Between April 2016 and December 2018, HMRC made just 19 deductions totalling £361,678. Activity was then paused during the pandemic, but following the Spring Statement 2025, HMRC has now restarted DRD in what it describes as a “test and learn phase”.
Why HMRC Is Restarting Direct Recovery of Debt
HMRC believes that DRD had a strong deterrent effect during the period it was actively used. The decision to restart activity forms part of broader government efforts to reduce the tax debt burden. With tax debt levels having risen significantly in recent years, HMRC is deploying all available tools to encourage compliance and recover outstanding amounts.
How the Process Works
The DRD process is not immediate, and taxpayers have multiple opportunities to engage with HMRC before action is taken:
- Established debt: DRD only applies to confirmed debts where the deadline for appeals has passed
- Repeated contact attempts: HMRC will have made numerous attempts to contact the taxpayer
- Mandatory face-to-face visit: Before DRD is applied, HMRC guarantees a face-to-face meeting to discuss the debt and explore resolution options, including time to pay arrangements
- 30-day objection period: Once the DRD process begins, taxpayers have 30 days to lodge an objection with HMRC
- Right of appeal: Taxpayers can appeal HMRC’s decision to a county court on specified grounds, including financial hardship
Important Safeguards
HMRC has implemented several safeguards to ensure DRD is used proportionately:
- Minimum balance protection: HMRC guarantees it will leave at least £5,000 in the debtor’s accounts to ensure funds remain available for essential expenses such as wages, mortgages, and household bills
- Vulnerability assessment: During the mandatory face-to-face meeting, HMRC will assess whether the taxpayer is vulnerable and requires additional support
- Last resort measure: DRD is only used after other recovery methods have been exhausted and the taxpayer has repeatedly ignored HMRC’s attempts to engage
What This Means for Taxpayers
The resumption of DRD serves as a clear reminder of the importance of engaging with HMRC when tax debts arise. Ignoring correspondence or failing to make payment arrangements can ultimately lead to direct action against bank accounts.
If you’re facing difficulty paying a tax bill, it’s crucial to:
- Communicate proactively with HMRC rather than ignoring correspondence
- Explore payment options such as time to pay arrangements, which allow you to spread payments over an agreed period
- Seek professional advice from a qualified accountant. The team here at Ormerod rutter can help you negotiate with HMRC and find a sustainable solution
- Respond promptly if you receive notification that DRD action is being considered
Ormerod Rutter’s Advice
Whilst HMRC’s DRD powers are subject to robust safeguards, the best approach is to address tax debts before they reach this stage. If you’re struggling with tax payments, professional advice can make a significant difference in achieving a manageable outcome.
Our team has extensive experience in helping clients navigate tax debt issues and negotiate effectively with HMRC. We can assess your situation, explore all available options, and represent your interests to achieve the best possible resolution.
If you have concerns about outstanding tax liabilities or have received correspondence from HMRC regarding unpaid debts, please don’t hesitate to contact us for confidential advice. Call 01905 777600 or email hello@ormerodrutter.co.uk to get in touch.
More guides and blogs can be found on our insights page.
