After being paused during the pandemic, HM Revenue and Customs (HMRC) has announced the resumption of the Direct Recovery of Debts (DRD) policy.
It has returned in a “test and learn phase” as HMRC increases its powers to ensure individuals and businesses fulfil their tax obligations.
HMRC collected £858.9 billion in tax last year, with around 90 per cent of taxpayers and businesses paying their tax on time, but the outstanding tax became debt.
With HMRC reintroducing the DRD policy, they can focus on taxpayers and businesses who can pay their outstanding tax debts but are choosing not to.
As the DRD policy returns, it’s an important reminder to all taxpayers about filing your tax returns on time to avoid escalating debt and potential action from HMRC.
How does the Direct Recovery of Debts policy work?
DRD is an effective method used when a taxpayer or business has the funds available to pay their HMRC their outstanding arrears but are refusing to do so.
The policy enables HMRC to force banks and building societies to transfer funds directly from the individual’s or business’s account.
HMRC can use these powers when outstanding debts exceed £1,000. There are stringent safeguards in place and HMRC want to ensure that taxpayers and businesses do not suffer as a result of debts being paid off.
HMRC will only take action against individuals who have continued to ignore their attempts to make contact, have passed the appeal timetables and have established debts.
There are measures in place where taxpayers who dispute the amount owed to HMRC have the automatic right to appeal.
HMRC increasing its powers as it tackles outstanding debts
Taxpayers were warned during the Spring Statement earlier this year that HMRC would be reintroducing the DRD policy.
Having been paused because of the pandemic, the phased return of DRD is a sign of intent as HMRC emphasise its determination to tackle outstanding tax debts and ensure all taxpayers and businesses are paying what they owe.
However, as they reintroduce the DRD policy, HMRC has also reiterated its commitment to helping vulnerable people who are struggling to pay off their outstanding debts.
The DRD criteria is strict, but HMRC will support the debtor if they do meet it. The most vulnerable can be taken out of DRD altogether and offered extra advice and support from HMRC’s team.
DRD returning is an important reminder to all taxpayers
As HMRC increases its powers, it offers a reminder to all UK taxpayers about the importance of assessing your own finances and ensuring you have filed your tax return on time and paid any debts.
It isn’t easy because for many taxpayers and businesses, cash can be extremely tight at times, but it is your legal obligation to pay taxes on time.
Failing to comply and continuing to ignore HMRC has serious consequences, and now HMRC have the power to enforce your bank or building society to pay the debts.
You shouldn’t let things escalate to that level because help and support are available if you need tax advice.
We provide comprehensive advice and support to help you understand your tax obligations, look at your financial position and ensure you have the tools to pay your taxes on time.
