The vast majority of people pay their taxes in full and on time. Some people require an additional prompt or reminder, and a significant number of people pay once we begin to pursue the money owed. However, a small minority refuse to pay, despite repeated contact from HM Revenue and Customs (HMRC).
The Direct Recovery of Debts (DRD, also known as enforcement by deduction from accounts) introduces a new way for HMRC to recover money owed to the Exchequer. It will affect a small number of individuals and businesses who are making an active decision not to pay, or to delay paying, the money they owe, even though they have sufficient funds in their bank and building society accounts.
Full details of the policy are set out in this HMRC issue briefing.
Sometimes people need additional help with their taxes, and HMRC is committed to providing this. Throughout consultation on this new power, the government has been clear that DRD should not apply to vulnerable customers, including those who need additional assistance with their taxes. To support this, the government is including stringent safeguards to ensure that adequate protection is in place for those vulnerable customers.
The government is extremely grateful to those organisations who have helped shape this guidance, by providing input and advice to earlier drafts.
The DRD legislation includes a commitment for HMRC to consider whether someone may be at a ‘particular disadvantage’ in dealing with their taxes, before making a decision whether to proceed; and to publish, in guidance, which factors are relevant to that decision.
This document describes those factors. It is not intended to be exhaustive, and does not preclude HMRC from considering other factors outside of this list.
The guidance confirms the approach HMRC will be taking in this area, and the range of scenarios that will be considered.
Those who are identified as vulnerable will not be considered for DRD, and will be given alternative support to help them pay the money they owe.
This document sets out the indicators that HMRC must consider to determine whether, to the best of their knowledge, a debtor (“P”) is at a particular disadvantage in dealing with their revenue and customs affairs.
The question to what extent the disadvantage or vulnerability identified affects P’s ability to deal with their revenue and customs affairs is critical. Whether the Direct Recovery of Debts process is not applied at all, or is applied subject to reasonable adjustments, will depend on the extent to which the particular disadvantage identified hinders P’s capacity to understand and deal with their tax or tax credits affairs and/or communicate with HMRC. Factors to be considered when making this judgement include the extent of the difficulty, and the longevity of the indicators.
If an HMRC official judges, based on HMRC’s awareness of these indicators, that P’s particular disadvantage is such that it will hinder P’s capacity to understand and deal with their tax or tax credit affairs, then P will not be considered for the Direct Recovery of Debts process and will be given alternative support to help them pay the money they owe.
If the HMRC official judges that P is at a disadvantage, but that P’s particular disadvantage is such that it does not hinder P’s capacity to understand and deal with their tax or tax credit affairs, then HMRC may still proceed with the Direct Recovery of Debt procedure but must consider whether to make reasonable adjustments to cater for P’s disadvantage. For example, if the HMRC official judges that P’s disadvantage is likely to last for a limited time, the official may delay the process for a fixed period of time.
On the other hand, if the official judges that P’s disadvantage is such that P’s situation is unlikely to improve in future, then P will not be considered for the Direct Recovery of Debts process and will be given alternative support to help them pay the money they owe.
Indicators for identifying vulnerable customers
Indicator A - a disability or long-term health condition
For example, a disability, mental health condition or learning difficulty that directly impacts on debtors’ ability to communicate with HMRC or to manage their HMRC affairs, meaning they are unable to understand or appreciate their indebtedness. The effects of the disability or condition may be temporary or long-term in nature.
Indicator B - a temporary illness, physical or mental health condition
For example, diagnosed with a serious illness or condition that affects them to such an extent that they are unable to understand or appreciate their indebtedness or to put their HMRC affairs in order.
Indicator C - personal issues
Issue that affect them to such an extent that they could not understand or cope by themselves.
- becoming recently widowed
- a family bereavement
- being made redundant
- a serious illness
- caring issues
- trauma caused by an assault
- domestic or financial abuse
These may be issues that affect P directly or someone close to them (such as an immediate family member).
Indicator D - lower levels of literacy, numeracy and/or education
For example, learning difficulties that mean they are unable to fully understand their indebtedness without advice or support.
John is suffering from Post-Traumatic Stress Disorder, caused by an incident while at his previous employer, which ultimately leads to him being unable to work.
John has no regular income. A substantial charging order against him and the ceasing of his benefits have caused his situation to deteriorate. The demand for the tax bill has added to his stress and has caused confusion, as he is already struggling to deal with his circumstances with no support.
In John’s case, the officer would refer John to specialist support within HMRC and consider the best way to support John in getting his affairs in order. John might also be signposted to a third-party organisation or charity to help him organise his non-tax affairs.