The Direct Recovery of Debts (DRD) is used when a person or business can afford to pay their dues but chooses not to, according to the government department
HM Revenue and Customs (HMRC) has declared the restart of a scheme that enables it to directly retrieve owed funds from debtors’ bank accounts. The policy, which was paused during the Covid-19 pandemic, has been restarted in a ‘test and learn’ phase.
HMRC confirmed the news this week. The Direct Recovery of Debts (DRD) is used when an individual or business can afford to pay their dues but chooses not to, according to the department.
In the Spring Statement, the UK Government announced that HMRC would reinstate DRD for those who opt not to pay. This allows HMRC to recoup owed money by instructing banks and building societies to directly deduct from a debtor’s account, and/or funds held in cash ISAs.
It can be applied where debtors owe £1,000 or more, with certain safeguards in place to prevent undue hardship and ensure adequate protection for vulnerable customers. These safeguards include only taking action against those with established debts, who have exceeded the appeal timetable, and who have consistently ignored HMRC’s attempts to establish contact, reports the Daily Record.
Anyone disputing the amount owed has the automatic right to appeal, the revenue body stated. Moreover, the safeguards ensure a minimum of £5,000 remains in the debtor’s accounts so as not to freeze funds needed for essential expenses such as wages, mortgages, or crucial business or household costs.
HMRC declared on its website: “The vast majority of taxpayers pay their taxes in full and on time, but a minority choose not to pay, even though they have the means to do so.”
Dawn Register, a tax dispute resolution partner at BDO, remarked: “Given the pressure on public finances, it’s clear that HMRC is determined to get tougher on those who can pay but don’t pay. For those who are struggling financially, we would always recommend that they explore ‘time to pay’ options to allow them to pay in instalments.
“HMRC needs to strike the right balance between supporting businesses and individuals in genuine financial difficulty, while being assertive with those who can afford to pay but choose not to.”
An HMRC spokesperson further added: “Most people pay tax on time and in full – but it’s right that we seek to recover tax from the tiny minority who have the funds to pay, but refuse to. These powers are subject to robust safeguards and we’ll continue to support customers who need help with their payments.”
