Clarity on Tax whist bankrupt

robotwars69 · 2 January 2018 at 12:05PM

Hi, just looking for a bit of clarity on what to do tax-wise whilst bankrupt.
I was a sole trader (VAT registered also) before BR (September), and I'm continuing to trade during BR.

1) 2016-17 Income Tax...End of Jan is coming up, so I understand I have to file that. The amount, whatever it turns out to be, I assume just gets dealt with via the OR. Is this correct?

2) Current earnings - what happens here? I'll have April 2017 - BR date (September) to account for for the next declaration, then what about now until April 2018? Then...what about April 2018 to discharge, Sep 2018?

3) I keep hearing about zero tax, but not sure how this works as self employed. Am I still supposed to be allowing for tax in my income calculations - if so, how do you do that as you go, as it will be a bit of a guess, do you just work out a stock 20% or try and work out more accurately after the threshold etc - which in the end, with me and my wife both self employed, and pretty much meeting the 'allowance' between us, isn't likely to amount to much above that personal allowance threshold. Is there an opportunity for saving here? If indeed this is what I should be doing...

4) VAT. I've not had any communication about this at all from HMRC etc, I went online to cancel it just in case, which it let me do, though didn't receive any confirmation (also noted my address details were the OR office, so I guess I wouldn't). I'm not charging for VAT, haven't received a new VAT number to do so, nor do I want one, so just billing without it, and not putting in any VAT returns. Is this right, is there anything else I need to to or should be doing?

The reason for me wanting clarity at this stage is that the OR gave me until end of January to see how income works out as the nature of what I do is erratic and is likely to be a lot less than the income supplied via the 'out-of-date' 2016-17 tax return amount which was provided on the original BR form. The OR said the expenses were all OK, so the only question mark was my (expected) income. So shortly I should be required to complete the SOA using the last three months or so as a basis for working out my income - just want to make sure all is on order properly regarding allowing for tax! Currently I'm working my figures on my spreadsheets as 'tax-free' rather than allowing and potentially getting stung, and all works out fairly good still for living to budget and avoiding a surplus etc Thanks

83dean0 · 6 January 2018 at 2:39AM

Hi I have been in a similar situation, I was self employed, VAT registered etc. I was made bankrupt by A petition from HMRC which I think amounts to over £150k basically my understanding is that the OR has all control of your finances in the first year. Anything above your basic living costs is considered surplus cash and must form part of your bankruptcy. HMRC should issue with a 00 tax code as any tax owed should be paid over to the OR, likewise any tax refund! For this reason some people may decide to quit their job and Persue an education, maybe reduce their hours or perhaps work for their partner. My SOA allowed me £205 a week so why would I work more hours to still only be allowed £205 of say my £500. Be sensible, remember the OR can only impose a earnings order in your first year of bankruptcy and can only apply this once you have a disposable income. Once applied this lasts 3 years and will keep u on that level, go get an education for a year, reduce the hours and spend time with the family, just avoid that order.

robotwars69 · 8 January 2018 at 1:05PM

Thanks for your reply 83dean0. Always good to hear someone who has been in my position. Just for clarity though, the OR has already verbally approved living costs as per original application and I'm working within that to avoid IPA, and with my wife also self employed, the situation is quite flexible to make sure we're in the those limits. I was just trying to get straight on how tax is supposed to work during this period (as well as April-BR and from April onwards) as I have had no communication on this.

ToxtethO'Grady · 12 January 2018 at 6:50PM

As all businesses are a bit different the best people to speak to are https://www.businessdebtline.org as the OR may ask you to pay it to them in different ways dependant on your business and how you manage your tax/NI/VAT, if you're VAT registered.

robotwars69 · 24 January 2018 at 9:45PM

Just resurrecting this as still totally confused! I'll give businessdebtline a call tomorrow anyway, but meanwhile just throwing this back out there. I'm confused because - in addition to questions in my original post - I've just tried to log in to HMRC to submit my 2016-2017 tax return (pre BR) - and there is not even an option to do so - it takes me straight to the business tax page and shows VAT only, states £x thousand owing, and that's it. No option to do a self assessment.

maxmycardagain · 24 January 2018 at 10:33PM

robotwars69 wrote: »

Just resurrecting this as still totally confused! I'll give businessdebtline a call tomorrow anyway, but meanwhile just throwing this back out there. I'm confused because - in addition to questions in my original post - I've just tried to log in to HMRC to submit my 2016-2017 tax return (pre BR) - and there is not even an option to do so - it takes me straight to the business tax page and shows VAT only, states £x thousand owing, and that's it. No option to do a self assessment.

ahh, the glorious Government Gateway...

like a revolving shop door... in/out and confused

robotwars69 · 25 January 2018 at 11:27AM

My options are complete VAT return or make a payment (clearly non of those are what I want) - or "Get another tax, duty or scheme/Find a tax, duty or scheme" button which sends me to a page to register for self assessment. So no idea how I'm supposed to file my 2016/17 return (if I have to?!).

woodformoretrees · 25 January 2018 at 2:33PM

I'm probably terribly out of date now, mine was 5 years ago, but you couldn't file an online return during your bankruptcy, you had to file a paper return....would that help/make any more sense? I phoned up the tax people and they send it out to me, I had to return it with BANKRUPT written across it, I remember it really helping my state of mind at the time

Clarity on Tax whist bankrupt

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