Bankruptcy and unpaid tax?

sortingmyshitout · 6 February 2018 at 1:50PM

I want to declare myself bankrupt, for a number of heinous unpaid debts that have built up over the years. Not least of all unpaid tax from the last few years. I've not even completed the tax returns.

As I understand it, if I declare bankruptcy today, then any debts accrued before today get "written off", but any debts I accrue from tomorrow onwards are still mine to deal with.

So what about a tax return from 3 years ago. If I complete that return AFTER declaring bankruptcy am I then liable for it; does that debt belong to the date I submit the return, or the date it was originally due (say, January 31st 2015 for example).

I know I'm a terrible human being and have lived with my head in the sand and made poor financial decisions. All I want to do is draw a line under it and make a fresh start and not have to worry about the past. I want to be a good upstanding citizen who pays his taxes, but I can't come close to settling all of my outstanding debts, so bankruptcy feels like the right choice.

Thanks.

National_Debtline · 6 February 2018 at 5:39PM

Hi there

Tax owed for previous tax years will be included in bankruptcy, even if you have not completed your tax returns. However is it strongly advisable to complete your tax returns before applying for bankruptcy for a number of reasons.

It will help reduce the possibility of a bankruptcy restriction order (BRO). A BRO extends the restrictions you are under during bankruptcy for between 2 to 15 years and can be made if the OR feels there has been reckless behaviour or misconduct. Completing the tax returns also reduces the risks of being accused of deliberately trying to avoid paying tax.

While the tax returns remain outstanding, you may still be incurring penalties from HMRC. It's important to file the tax returns prior to the bankruptcy order, in order to avoid the risk of penalties being issued after the bankruptcy order. You may be able to challenge penalties issued after bankruptcy but it is a complicated issue you would need specialist advice on. Good luck with it all.

Susie
@natdebtline

sortingmyshitout · 6 February 2018 at 7:57PM

Thanks Susie.

sortingmyshitout · 7 February 2018 at 12:27AM

Am I also right in thinking that since I won't be paying any of the tax (other than what the OR can take from me during my bankruptcy which won't come close to what I owe) that there's no point in me being particularly detailed with these tax returns?

Normally the aim would be to use every trick in the book to offset as many pennies as possible, but if my intention is just to get them done and submitted I could really just put in my income (which I have MUCH better records of than my expenditure), some big ticket items (new laptop etc) and be done with it? No point me spending ages working out every little thing I've spent or bill that can be fractionally put towards offsetting my self-employed working from home income?

National_Debtline · 8 February 2018 at 11:57AM

Hi there again

I'd say it's still important to complete the tax returns as accurately as you can, as you will be putting your name to them to say the information you have provided is true and accurate. Understandably this may be difficult if you are going back a number of years. You may want to speak to Business Debtline who offer specialist advice on business debts.

Susie
@natdebtline

sortingmyshitout · 1 March 2018 at 2:23PM

Thanks Susie, a couple of weeks ago I did indeed submit many years worth of tax returns, as accurate as I could make them. Involved digging through a lot of old emails and old receipts due to a hard drive crash that had some records on it, but I kinda got there in the end!

Bankruptcy and unpaid tax?

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