Second Bankruptcy?

BreakTheCycle · 23 November 2017 at 10:50PM

Hi MSE board!

I've been a stupid sod and I need some help if anyone would be so kind. I'm suddenly out of my mind with panic after having a dawning realisation a few weeks ago about what an idiot I've been.

I declared bankruptcy at the end of 2015 after running up a few debts and being ripped off bigtime by a couple of people I did work for. I'm self employed. I've been paying the BR every month for 2 years and 2 months. Though I budgeted for income tax I was told that I would be put on a zero tax code and wouldnt get a new one until the following year. So I assumed I'd pay tax again from April 2016.

But at the time they said 'you won't have to pay tax until you get a new tax code.'

Like an idiot I took them at their word. I still haven't heard a word from the taxman so I don't know if I have a new code or not. But I'm guessing a new one would have been put in place in Aprial 2016.

First I didn't budget enough for tax and had no money left after expenses and the payment to the BR to be able to budget more, so I wasnt saving enough for tax. Second, I ended up working as a contractor for a startup that shut up shop...not only owing me my salary for the month but also leaving me scrabbling around for work for a while. During that time I had to spend the little I had saved for tax just to keep a roof over my head.

I started as a contractor for a new company at the start of this year and have a steady income now but knew I hadnt got anything put aside to pay tax for 2016/2017. I stuck my head in the sand and got depressed about it. Then kept spending here and there to try to cheer myself up. Then it got to the point where I was spedning what I should have been saving for 2017/2018 as well.

I'm resolved to fixing this but I don't know what I can do. I'm fixing my bad money habits and from this month have been budgeting everything down to the last penny.

My problem is that I have about £2k saved and I'm going to owe about £9k for 2016/2017 and £9k for 2017/2018. The deadline for filing online for 2016/2017 and for paying up is January 31 2018.

If the HMRC agreed something where I'd be paying it off over time, unless it was £50 a month or something (which would take forever so I don't think they would go for it) surely I'd just be giving them the money that I should be saving for the next years tax!

What options do I have? What are the HMRC likely to do? I'm not trying to dodge tax, I've just been a complete idiot. Is the likely solution that I would have to declare bankruptcy a second time and then be paying the BR for another 3 years to get a handle on this? Is that even possible?

Thanks in advance for any help anyone can give! (and sorry for going on so long)

BreakTheCycle · 24 November 2017 at 12:07AM

I should add that I don't own a car and am a private tenant so I dont have any assets to sell that could be used to pay the tax bill.

Potbellypig · 24 November 2017 at 2:00PM

I don't think you need anyone to tell you that HMRC take non payment of taxes very seriously.

https://www.gov.uk/if-you-dont-pay-your-tax-bill

You won't have the money, so you need to contact them and hope for the best.

National_Debtline · 24 November 2017 at 2:02PM

Hi BreakTheCycle

I assume when you say you have been paying the BR for 2 years and 2 months you mean you have an income payment agreement (IPA)? Did you inform the OR when you have had a change in income? That could affect the amount you are expected to pay into the IPA.

I'd advise you need to seek some specialist advice on the tax debt and how your tax liability affects the amount you should be paying into your IPA. You can speak to Business Debtline about this as they offer specialist advice to self employed people, you can call them on 0800 197 6026 .

Susie
@natdebtline

BreakTheCycle · 24 November 2017 at 6:28PM

Potbellypig wrote: »

I don't think you need anyone to tell you that HMRC take non payment of taxes very seriously.

Youre right. That's why I'm here.

I just cant see how it's going to work. I'll submit my return and theyll send me a bill for £9k. I'll phone and tell them I cant pay and theyll give me (at absolute best from what Ive read) 12 months to pay it.

That means Im looking to find £750 a month after paying my £200 BR and the BR was worked out based on what I can afford to pay after expenses...so theres nowhere to find that £750!!! The only way I could do it would be to use money Im supposed to be saving for this years tax and even that would be short since my earnings have fallen. That would mean I would just be going round in circles year after year with the same problem.

I know its my fault and I don't want to "get away" with anything but I can't see a way out. If HMRC would take £280 a month over 3 years towars my back taxesd then that would be OK as I could speak to the BR and get my IPA lowered. But from what Im told, they wont go for that.

BreakTheCycle · 24 November 2017 at 6:31PM

National_Debtline wrote: »

I assume when you say you have been paying the BR for 2 years and 2 months you mean you have an income payment agreement (IPA)? Did you inform the OR when you have had a change in income? That could affect the amount you are expected to pay into the IPA.

Thank you. I will call Business Debtline and see what they say.

I have an IPA yes and I didn't inform the BR when there was a change in income as it was only supposed to be a drop in income for one month, maybe two and I thought I could get by. Turns out it was for much longer than that. Head in the sand and all that.

Potbellypig · 24 November 2017 at 9:58PM

BreakTheCycle wrote: »

Youre right. That's why I'm here.

I just cant see how it's going to work. I'll submit my return and theyll send me a bill for £9k. I'll phone and tell them I cant pay and theyll give me (at absolute best from what Ive read) 12 months to pay it.

That means Im looking to find £750 a month after paying my £200 BR and the BR was worked out based on what I can afford to pay after expenses...so theres nowhere to find that £750!!! The only way I could do it would be to use money Im supposed to be saving for this years tax and even that would be short since my earnings have fallen. That would mean I would just be going round in circles year after year with the same problem.

I know its my fault and I don't want to "get away" with anything but I can't see a way out. If HMRC would take £280 a month over 3 years towars my back taxesd then that would be OK as I could speak to the BR and get my IPA lowered. But from what Im told, they wont go for that.

Yea I'd be surprised if they accept £280 over 3 years too. They're certainly not renowned for that. Good luck, but I wouldn't be holding out too much hope. 12 months if you're lucky, but within their rights to ask for the whole of it and take whatever action from there. There's certainly no room for compassion in it, unfortunately for you.

HHarry · 25 November 2017 at 9:40AM

Are you sure the £9k is correct? That's earnings around £40k for the year.

fatbelly · 25 November 2017 at 9:49AM

If you need to declare bankruptcy a second time, yes you can, though there will be other options too.

For now the main things are to get your IPA sorted and get an accountant to look at the figures you will be submitting for 16/17 to see if the tax liability can be reduced

Second Bankruptcy?

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