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You may have heard that HMRC are proposing new rules on the Direct Recovery of Debts (DRD).

HMRC recognise that:

“…there are concerns about the impact of this change on vulnerable members of society. We must ensure that there are strong safeguards in place so that this is only targeted at the truly non-compliant”.

HMRC estimate that:

  • DRD will apply to around 17,000 cases a year
  • the debtors affected have an average of £5,800 in tax and tax credit debts and
  • around half of the debtors affected have more than £20,000 in their bank and building society accounts and ISAs.

After much concern was expressed by professional and representative bodies, HMRC announced on 21 November extensions to the safeguards proposed.

The main safeguards before the DRD will apply are that:

  • a taxpayer will have been contacted a minimum of four times about their tax debt (HMRC say nine times on average)
  • HMRC will have had a face-to-face meeting with the taxpayer
  • the measures will only be applied where in excess of £1,000 of tax is due and unpaid
  • the measures will never be utilised in such a way as to leave a taxpayer with less than £5,000 in their bank account. Regard will also be had to their regular pattern of expenditure over the previous 12 month period in considering whether taking the money would cause hardship.

HMRC will set up a dedicated DRD team and helpline, including a specialist unit to deal with cases involving vulnerable members of society.

The safeguards after implementation are that for 30 calendar days from the date of application of the measures, HMRC will not actually be given access to the monies. Instead, during that period, the monies will in effect, be blocked and the taxpayer will be able to make representations that:

  • either a transfer of the money to HMRC would cause hardship or
  • that the tax debt is not due.

Taxpayers will be given a further 30 days to appeal to the Court for an independent review.

If those representations are not accepted, the monies will be transferred to HMRC.

So it may not be as bad as you might have thought. We will keep you in touch with developments.

More from our tax experts

You can find all of our latest tax articles and tax resources here.

If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.

Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.

Stephen Charles is a tax partner at the firm, specialising in corporate and business taxation. For more details and advice, please contact Stephen on [email protected] or 0114 266 7141.

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