Having worked with an IVA company I have found that my self employed income is not enough to support an IVA (explains the debt problem if nothing else!)
I calculated my 2009/2010 self assessment tax and submitted it to HMRC. I have the cash to pay the tax but not enough for the 2011 payment on account.
My IVA advisor told me not to pay HMRC but keep it for the IVA.
I advised HMRC of this in a recorded letter.
In the meantime HMRC have added a late penalty and are now threatening legal action.
Should I pay the 2009/2010 tax and ask to pay the on account money in installments?
Has your IVA been approved yet because there are certain HMRC debts that would be incorporated into the IVA? If the IVA has not been approved yet there is no need to pay any of the tax bill. When was your IVA approved[if it was]?
If you have a disposable income you can do an IVA. HMRC do not have minimum dividend requirements as do the majority of other creditors. I cannot see what options are available other than bankruptcy because HMRC rarely accept DMPs.
I am also confused why your advisor told you to keep the money for the IVA yet you do not qualify. Makes no sense to me. Perhaps you should take a second opinion because something does not sound right. You are being advised not to pay a tax bill but to give it to the IVA company for an IVA that you cannot afford.
Who has been advising you if you do not mind saying[and please do not say McCambridge,Duffy]?
Absolutely not. You can trade while bankrupt although not as a director of a limited company. There are restrictions on credit but no different to those in an IVA. You will be allocated new VAT, PAYE and self assessment reference numbers and all outstanding debts to HMRC will be wiped out the same as other unsecured creditors. It gives you a chance to restart and does not mean you have to go employed or sign on the dole.
We are now at the end of 2010/11 and any IVA or bankruptcy would be based on projections for 2011/12. Irrespective of what your 2009/10 return says, if you believe that your business can generate sufficent profits to pay your living costs, tax and a contribution to creditors, an IVA is still an option. IVAs come down to affordability and I have done many IVAs for client who have had previous losses because they alone know the viability of their businesses.
Ultimately, if your business was a waste of your time and you could make more money stacking shelves you would do that. To continue on self employed as you are doing, means you believe the business to be worth saving and worth all the time and effort you put in.
I'm a director of my limited company, but assume that I'd resign and appoint a family member as director.
My income/expenditure spreadsheet shows a negative surplus. This explains how I got into the debt. However, I haven't used a credit card for the last two years, living soley on income.
I need to work on the spread-sheet.
In the meantime what should I do about the letters from HMRC?
The HMRC debt must actually relate to the company and therefore is not your liability. If you have been advised to not pay a company debt and divert the funds to your own use this is quite serious.
If you go bankrupt you would have to resign and the shareholding would become an asset of the Official Receiver. The company could then be sold or liquidated depending on any value and prospective purchasers so you could trade as self employed.
The HMRC debt does concern me because company debts cannot be included in a personal IVA and you must operate as a director within the law.
You could reign beforehand and a new director appointed. The shareholding[if any]would need to be addressed as it may have a value but this can be dealt with post bankruprcy.
Should you go down the IVA route you would also need to check the articles to make sure there is no conflict but this is relatively easily done.
Finally, you must have other income or be a large earner if you have personal tax liabilties yet you are an employee. How has this arisen?
In essence you are a director and shareholder of a company which makes enough profits to pay corporation tax. I assume you draw a salary and would then have an entitlement to dividends. You have other income such as a pension or self employed income and you have a personal tax liability on top of your PAYE.
You obviously have a reasonable income so your outgoings must be too high or your debts are at such a level that the dividend achievable would be likely rejected. I am confused that an IVA is not an option so bankrupcty does look certain.
Protect the money you have to pay HMRC and give it to the Official Receiver after you declare bankruptcy.
