HM Revenue & Customs (HMRC) has reintroduced a hard-hitting tool to tackle unpaid tax: the ability to take money directly from a debtor’s bank account.
Known as Direct Recovery of Debts (DRD), this initiative has sparked lively debate, not least because it sounds rather like HMRC being given unfettered access to your current account.
So what does it really mean, should clients be worried, and importantly, what can be done to defend against it?
The Basics of DRD
The policy is aimed squarely at taxpayers who can pay but won’t. In other words, those who have the funds available but have ignored repeated requests to settle their tax bills.
HMRC will be able to instruct banks and building societies to withdraw what is owed. Crucially:
• The debt must be over £1,000 before DRD can be considered.
• Taxpayers must be left with at least £5,000 across all their accounts after any deduction.
• Before touching a penny, HMRC must attempt a face-to-face meeting with the debtor, where alternative payment plans can be discussed and vulnerability assessed.
• Taxpayers get a 30-day window to object before money is taken, and an option to appeal to the County Court.
Safeguards & Concerns
The official line is that this will only apply to ‘won’t pay’ rather than ‘can’t pay’ cases.
Safeguards are built in to protect vulnerable taxpayers, but critics are wary of errors, misidentification, and the potential for heavy-handed enforcement.
For solicitors, the likely flashpoints will be:
– Disputes about vulnerability (for example, illness, caring responsibilities, or financial hardship).
– Joint accounts and third-party interests, where ownership of funds is not straightforward.
– Procedural fairness — whether HMRC has properly followed the face-to-face and objection requirements.
Responding To DRD
Although HMRC has been given stronger enforcement powers, taxpayers are not without protection. There are a number of professional steps that can help ensure any action is fair, proportionate, and properly scrutinised:
- Dispute the debt – If the liability itself is uncertain, challenge the underlying assessment. HMRC is expected to pause recovery while a legitimate dispute is ongoing.
- Use the 30-day objection window – Submitting a clear and evidence-based objection within the statutory period can delay or prevent recovery, giving time for proper review.
- Highlight vulnerability or hardship – HMRC must consider whether a taxpayer is genuinely unable to pay. Medical evidence, caring responsibilities, or financial constraints can all be relevant.
- Clarify account ownership – Where accounts are jointly held or funds belong to a third party, HMRC’s reach may be limited. Clear documentation of beneficial ownership is key.
- Check procedural compliance – If HMRC has not carried out a face-to-face meeting, failed to give notice, or overlooked its safeguards, this can form the basis for challenging the process.
- Negotiate a Time to Pay (TTP) arrangement – Often the most pragmatic option, a well-supported repayment proposal can provide certainty for both HMRC and the taxpayer.
- Legal remedies in complex cases – Where issues are novel or unclear, judicial review or court proceedings may sometimes be appropriate, though these are generally a last resort.
Practical Advice
For most taxpayers who are engaged and cooperative, this policy should not be a cause for panic. If HMRC calls, the best approach remains to open the door, not hide behind the curtains. Early communication and sensible repayment arrangements will normally prevent matters escalating.
However, for clients with complex finances, multiple accounts, international holdings, or irregular cash flow — it is worth carrying out a risk review now. Keeping clear records and being ready to demonstrate hardship, if relevant, will be essential if DRD is ever threatened.
Looking Ahead
HMRC’s message is clear: non-payment will not be tolerated. The ability to reach directly into bank accounts marks a cultural shift in tax enforcement. Whether this proves to be a neat way of collecting stubborn debts, or a policy that generates litigation and newspaper headlines, remains to be seen.
Direct Recovery of Debts is another reminder that the tax system is becoming more assertive, data-driven and technology-enabled. For solicitors, the role will be to advise on the safeguards, challenge misuse where necessary, and guide clients towards early, practical solutions.
HMRC may have a new lever but clients still have rights, and it is our job to ensure those rights are exercised robustly and effectively.
If you are concerned about DRD or other HMRC enforcement measures, please get in touch with our team for tailored advice and support.
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Tel: 01603 693500
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Tel: 01263 823398
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Tel: 01692 660230