Direct Recovery of Debt and vulnerable customers
07 April 2016
Direct Recovery of Debts (DRD), also referred to as enforcement by deduction from accounts, will affect a small number of individuals and businesses who have made 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.
Concerns have been raised since DRD was first announced, as to how HMRC will protect vulnerable customers, specifically tax payers who find themselves at the receiving end of enforcement action as a result of these new powers.
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. The policy paper Direct Recovery of Debts - vulnerable customers describes those factors, as set out below. 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.
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.
For example:
- 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 the debtor 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.
Case study
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.