As explained in an earlier article, HMRC restarted direct recovery of debts (DRD) in September 2025 having paused all DRD activity during the COVID-19 pandemic. HMRC is currently in a “test and learn phase” and has restricted its DRD activities to a small number of companies at first. HMRC will review the outcome of this engagement before expanding the use of its DRD powers to more taxpayers, including individuals.  

ICAEW understands that some companies have received a letter from HMRC informing them that HMRC is considering using its DRD powers to recover the tax it is owed. In each case, the company has been contacted previously about its tax debt. HMRC believes that DRD had a strong deterrent effect when it was used in the past. ICAEW understands that early indications show that the trial has been successful in encouraging companies to engage with HMRC to settle their tax debts.  

HMRC’s DRD powers are subject to several safeguards. These include that HMRC will only apply DRD where the person has established debts, has passed the timetable for appeals, and has repeatedly ignored HMRC’s attempts to make contact. HMRC will have a face-to-face meeting with the taxpayer before debts are recovered through DRD.  

Taxpayers who have, or expect to have tax debts, should consider contacting HMRC to agree a time to pay arrangement. This allows the taxpayer to set up a payment plan with HMRC to pay the tax due in instalments. A time to pay arrangement can be set up online where the relevant conditions are satisfied or by contacting HMRC. HMRC will continue to charge interest on tax paid late. However, it may be possible to avoid any late payment penalties where a time to pay arrangement is arranged in good time, and is stuck to.  

HMRC has a range of options open to it for collecting tax debt where a payment plan is not agreed, including using a debt collection agency.  

Further information 

• Issue Briefing: Direct Recovery of Debts - GOV.UK