Direct recovery of tax debts (DRD)

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Direct recovery of tax debts (DRD)
  • DRD procedure in outline
  • Territorial scope of DRD
  • Relevant sum
  • Face-to-face meeting and HMRC's duty under paragraph 5
  • HMRC issues an information notice to the deposit-taker
  • Time limit for compliance by the deposit-taker
  • Prescribed information required from deposit-taker
  • HMRC issues a hold notice to the deposit-taker
  • Duration of holding arrangements
  • More...

Direct recovery of tax debts (DRD)

Direct recovery of tax debts (DRD) refers to HMRC's ability to instruct banks and building societies (ie deposit-takers) to deduct amounts to settle taxpayers' tax debts directly from their bank accounts. HMRC's power to use DRD came into effect from 18 November 2015 (the date of Royal Assent of the Finance (No 2) Act 2015 (F(No 2)A 2015)).

Although the F(No 2)A 2015 refers to these provisions as 'enforcement by deduction from accounts', this Practice Note refers to the provisions as 'DRD', the term with which advisers are familiar.

DRD procedure in outline

Broadly, the DRD process (discussed in detail below, along with the meaning of the important terms) can be summarised as follows:

  1. the taxpayer owes tax debts totalling £1,000 or more, which HMRC has been chasing by post and by telephone—for more information, see: Relevant sum below

  2. HMRC (i) must (before issuing an information or a hold notice) consider whether there are any matters that may cause a taxpayer to be at a particular disadvantage in dealing with their tax affairs and (ii) has stated (although this is not enshrined in the legislation) that it will visit the taxpayer to confirm that the debt (the 'relevant sum') is due and to check whether the taxpayer is 'vulnerable' (vulnerable taxpayers that do not have the capacity to understand and deal with

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