Commentary

V5.174A VAT debts—enforcement by deduction from accounts (Direct Recovery of Debts, or DRD)

Part V5 Compliance, enforcement and appeals

V5.174A VAT debts—enforcement by deduction from accounts (Direct Recovery of Debts, or DRD)

V5.174A VAT debts—enforcement by deduction from accounts (Direct Recovery of Debts, or DRD)

In the 2014 Budget, it was announced1 that 'The government will modernise and strengthen HMRC's powers to recover tax and tax credit debts directly from debtors' bank and building society accounts, including ISAs. The Direct Recovery of Debts will focus on debtors who owe at least £1,000 and have been contacted multiple times by HMRC to pay. A minimum aggregate balance of £5,000 will be left across all accounts, including ISAs, after the debt is recovered.' The ensuing legislation2 duly appeared in the Finance (No 2) Act 2015, and came into force on 18 November 2015. A Direct Recovery of Debts – review covering the period from April 2016 to December 2018 concluded:

'The DRD intervention has achieved its policy objectives and has provided HMRC with a crucial lever in tackling those debtors who deliberately choose not to pay their tax debts, while being able to afford to do so. Additional tax revenue totalling £178 million was recovered through DRD intervention, reducing any unfair advantage those debtors have over the compliant majority.

The low level of complaints, objections and appeals, the extremely low level of these being upheld, and the small proportion of vulnerable customers identified further confirm that the correct debtors are being taken through formal DRD processes.'

The legislation is described in detail below.

DRD does not apply in Scotland3.

Direct Recovery of Debts—conditions

For DRD to be applied, the debt must meet a number of conditions:

  1.  

    •     The

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