HMRC Restarts Direct Recovery of Debts (DRD) After Four-Year Hiatus

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HMRC Restarts Direct Recovery of Debts (DRD) After Four-Year Hiatus

After a four-year pause, HMRC has announced the return of its Direct Recovery of Debts (DRD) powers, enabling it to collect unpaid tax debts directly from bank accounts. This follows a hiatus during the pandemic, and the scheme is being reintroduced under a “test and learn” approach.

What is Direct Recovery of Debts?

The DRD rules allow HMRC to recover unpaid tax directly from bank accounts, building societies, or even cash ISAs, where taxpayers owe £1,000 or more. The measure is targeted at individuals and businesses who have the means to pay but have chosen not to.

Before the pandemic, DRD was rarely used, with only 19 cases in two years. However, its reintroduction signals a renewed determination by HMRC to collect unpaid tax more assertively.

How the Process Works

HMRC has outlined several safeguards to ensure that DRD is applied fairly:

• Eligibility: Only debts over £1,000 can be considered.

• Final Stage Measure: Action will only be taken after appeals deadlines have passed and repeated attempts to contact the taxpayer have been ignored.

• Face-to-Face Verification: Every debtor will receive a personal visit from HMRC agents to confirm the debt is theirs and to discuss repayment options.

• Alternative Arrangements: Taxpayers will still be offered “Time to Pay” plans, allowing them to spread repayments.

In short, DRD is designed for cases where taxpayers can pay but refuse to engage with HMRC.

Why Now?

The government announced the return of DRD in the Spring Statement (March 2025), alongside a significant investment in tax debt collection. HMRC has been allocated £630 million to expand its debt recovery teams, including plans to hire 2,400 new staff. This initiative is expected to recover £11 billion in unpaid tax by 2030.

Expert Commentary

Tax specialists have highlighted the balance HMRC must strike. As Dawn Register, Partner at BDO, explains:

“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. The relaunch of this draconian power underlines how important it is not to stick your head in the sand and ignore HMRC demands.”

She also stressed the importance of protecting those in genuine financial hardship, while ensuring deliberate non-payers are pursued firmly.

What This Means for Businesses and Individuals

For most taxpayers, DRD will only ever be a risk if they ignore repeated communication from HMRC. However, the return of this tool is a clear reminder that inaction carries serious consequences.

Businesses and individuals who are struggling to meet tax payments should engage early with HMRC and seek a repayment plan. HMRC’s “Time to Pay” service remains available to spread costs over an agreed period, avoiding escalation to DRD.

Key Takeaway

The return of DRD shows HMRC’s tougher stance on tax debt recovery. While only a small number of cases are likely to be targeted, the message is clear: if you can pay your tax, you must pay itor risk HMRC taking it directly from your bank account.

requently Asked Questions (FAQs) on HMRC Direct Recovery of Debts

What is HMRC Direct Recovery of Debts (DRD)?

DRD allows HMRC to collect unpaid tax debts of £1,000 or more directly from a taxpayer’s bank account, building society, or ISA, but only after other attempts to recover the debt have failed.

Who can HMRC use DRD against?

HMRC can only use DRD against individuals or businesses who can afford to pay but refuse to do so. It is not applied to those in genuine financial difficulty.

How much must you owe before HMRC uses DRD?

DRD applies where debts are £1,000 or more. Smaller debts will not be collected using this method.

Will HMRC warn me before using DRD?

Yes. HMRC will send letters, make contact attempts, and even carry out a face-to-face visit before DRD is considered. Time to Pay arrangements will be offered first.

Can HMRC take money from ISAs?

Yes. DRD powers extend to bank accounts, building societies, and cash ISAs, provided the debt threshold is met and safeguards are followed.

How can I avoid DRD action?

The best way to avoid DRD is to engage with HMRC early if you are struggling to pay. Applying for a Time to Pay arrangement can spread the cost over an agreed period and prevent direct recovery action.