www.iva.co.uk

Hi All, I'm self employed & one month into my IVA, I've been told I need to pay my HMRC contributions directly to my IVA company until March 2012.

I don't owe HMRC anything, I had already paid my 2010/2011 liability in full prior to my IVA getting approved & have a payment plan in place directly with HMRC for my 2011/2012 liability.

There was no mention of HMRC on my proposal or my chairmans report as I don't owe them anything so it seems odd to pay money directly to my IVA company.

Could anyone advise if this seems correct when HMRC were not invloved in my IVA?

Many Thanks

Who was it advised you of this Hippo??

It was my IP - when I was completing my IVA paperwork it was mentioned but I did advise them that I did not owe anything to HMRC so assumed I could just continue paying HMRC directly. I will call my IP tomorrow but just wanted to get an idea if it's a normal request when nothing is owed to HMRC.

Czn't say I've heard of that before - hopefully one of the experts can advise.

Even if the HMRC had made a claim of monies owed that would surely come out of the agreed monthly IVA payment it would have nothing to do with future payments. I would ring the HMRC as it sounds dodgy to me and get their stance on it, if you do pay money over then get chased by the HMRC you will probably find it very hard to get your IP to release the funds back to you, as with any company they like to receive money not give back

Generally, if self employed the tax liability for the tax year during which the IVA was started goes to the IP. To be honest I do not know how they work this, but HMRC estimated my liability for that tax year and this was entered into my IVA. The dividend was agreed at around 30% and 30% of the tax liability was paid over during the first few months of my IVA, as an additional payment. Come April my IVA payments dropped by the amount I was paying extra.

So the effect was that HMRC were paid the agreed dividend by the end of the tax year in which my IVA began. After that it's my problem !

I am really glad I am not self employed all of a sudden lol

Mine's only part time to supplement the meagre wage us public servants get !!!

I am public sector but I can't say my wage is meagre but then I do work ridiculously long hours over 24 hours 365 days a year and save peoples lives so its not amazing money either dependent on your perspective

Yeah Dave and a professional footballer can earn a £100k for a few minutes kicking a ball around ! Somewhat out of perspective! Anyhoo, I won't get started on that one :0)

The rules relating to this are actually quite simple and should have been properly explained to you at the time you put forward your IVA proposals.

HMRC work in fiscal years from 6 April to 5 April each year. If an IVA is accepted at any time during that year, they are unable to split a year to calculate the pre and post IVA sums due. So they take the view that all of the tax due for the fiscal year in which the IVA was accepted becomes a claim in the IVA. So if your IVA was accepted in September 2011, all of the tax due for fiscal year 2011/2012 becomes a claim in the IVA - which of course cannot be calculated until at least 5 April 2012.

Your IP should have prepared trading projections with you showing the amount of tax you would need to set aside moving forward. In the year of the IVA - ie unti 5 April in the year following - that money has to be paid into the IVA, and thus an estimated claim included into the IVA for the tax due.

I would say, however, that if no provision was made for this in your own IVA, and HMRC have not submitted modifications to this effect, then you may not have to do this, although HMRC often write to IPs afterwards enquiring whether the monies are being collected as an after-acquired asset - so I always find it best to include the provision in my own proposals, making sure my clients and their accountants fully understand this rather odd ruling.

Hope this helps, but probably better for you to get your own IP to run through things with you again.

Many Thanks for explaining Melanie! I

There is nothing that anyone can add to that as what Mel doesn't know on HMRC with IVAs isn't worth knowing! Hope you get it sorted with your own IP - let us know how you get on.

Regards,