HMRC’s Debt Recovery Powers Are Back – Don’t Get Caught Off Guard
We’re heading into another busy tax season, so thought now would be a good time to talk about something that could catch many taxpayers off guard this year: the return of HMRC’s Direct Recovery of Debt (DRD) powers!
While most people pay their tax on time, the reality is that cashflow can tighten, unexpected bills can come along, and sometimes payments are missed. If that happens, it’s vitally important to talk to HMRC early or, even better, speak to your accountant, before things escalate.
Why? Because HMRC has restarted a powerful programme that allows them to recover unpaid tax directly from your bank account.
What is Direct Recovery of Debt (DRD)?
The Direct Recovery of Debt scheme gives HMRC the ability to take money directly from bank or building society accounts (including cash ISAs) to recover unpaid tax debts of £1,000 or more.
This isn’t new – the programme was originally launched in 2015 but was paused during the Covid pandemic. And now, it’s back in operation!
The aim is to tackle cases where taxpayers have repeatedly ignored correspondence or failed to engage with HMRC, even after plenty of opportunities to resolve things.
HMRC has been clear that DRD will only apply when:
The debt is established and has passed all appeal deadlines
The individual or franchise business has ignored multiple attempts by HMRC to make contact
The taxpayer holds enough funds to pay the debt and still leave at least £5,000 across their accounts
The person has been visited face-to-face by HMRC before any action is taken
While there are safeguards in place, this is still one of the most severe enforcement tools HMRC has, and its reintroduction is sending a clear message to all: debt recovery efforts are being ramped up.
Why this matters now
With 31 January fast approaching, the annual Self-Assessment deadline is looming on the horizon for millions of taxpayers.
If you’re up to date with your filings and payments, there’s nothing to worry about. But if you’ve fallen behind – either on submitting your return or paying your tax bill – it’s vital not to ignore HMRC’s letters or demands.
Once a debt becomes “established” (meaning it’s due and not under appeal), you could be on their radar for DRD. Even if you believe HMRC has made a mistake, not engaging with them can make things worse for you.
In other words: don’t let silence and inaction turn what’s currently a solvable problem into a serious one. Get in touch with your accountant or HMRC and get things sorted.
What to do if you’re struggling to pay
If you find yourself in financial difficulties, please know there’s help available, and you do not need to wait for things to escalate. HMRC runs a Time to Pay (TTP) scheme that allows individuals and franchise businesses to spread their tax liabilities over several months in manageable instalments.
The key here is communication. If you can show that you’re willing to pay and can afford a regular repayment plan, HMRC is often open to discussing terms.
We understand that if you’re not sure what information you need to provide or how to present your situation, tackling this with HMRC can feel intimidating. But rest assured, you don’t have to go it alone – this is where your accountant can make all the difference.
At The Franchise Accounting Specialists, we help clients every year with:
Preparing and filing tax returns on time, to avoid unnecessary penalties
Reviewing cashflow to assess whether a Time to Pay arrangement is needed
Communicating directly with HMRC to agree on realistic repayment schedules
Keeping your records accurate to avoid any disputes over what’s owed
When you deal with potential payment issues early, you can stay in control and avoid the stress and possible reputational damage of HMRC enforcement.
A word of reassurance
It’s important to remember that HMRC doesn’t use DRD as a first step. It’s a last resort, and only for those who’ve ignored all other communications.
As we’ve mentioned, if you’ve been proactive, filed your returns, and stayed in touch with your accountant, you’re unlikely to be affected. The real risk lies in doing nothing.
And it’s never too late to reach out – even if you’ve missed a deadline or you’re not sure what you owe, there are always options available before enforcement action is taken.
Your next steps
Check your filing status: Make sure your prior year tax return is submitted and any outstanding amounts are paid or planned for
Stay on top of communication: If you’ve received a letter or warning from HMRC, contact your accountant immediately – they can help you understand where you stand and support you to act quickly
Plan for the next tax year: If cashflow was tight this year, your accountant can help you create a more predictable tax plan for next year, smoothing out payments and avoiding surprises
At The Franchise Accounting Specialists we’re here to support our clients every step of the way – whether that’s getting your tax return filed, setting up a Time to Pay plan, or just talking through your options – so please get in touch with us.
