IVA & Sole Trader "Earnings"

FortyTwo

Hi,

I've recently entered into an IVA and sought advice before hand both from the organisation PayPlan and the chat forum on iva.co.uk. They advised that I would be okay setting up as a sole trader but would need to declare any income that I earned from the project.

My question is how should I define "income"? I understand that according to the tax man 'income' is all of my earnings. However, so long as the money is kept within my business account for the purposes of developing and growing the company (starting from scratch and aiming to build up the income/equipment to go full time) can my debtors make a legitimate claim on it?

Thanks in advance for your help.

42

PS: I've been occasionally lurking on these boards for some time and thought it would be the right moment to take the posting plunge. Thanks guys.

Charco_2

Grey areas...

Yes, your business needs some working capital to keep it running day to day and yes your creditors will only really have a claim on your take home pay but i wonder if you'd get away with having £X,000's in an account in your name and not be asked to bring it into your proposal!

The short answer here is that it depends on the terms agreed within your IVA... usually the agreement would indicate that business assets etc would be excluded (and i hope that your IVA would include such terms!)

You'll agree a monthly contribution and be expected to stick to it but this figure would be reviewed each year and your IP/Creditors will be interested in your annual accounts. If you're claiming that £X,000 are in your account for development purposes then your creditors are likely to want to know how much this will add to your business turnover and ultimately profits!

i.e. I've got £4,000 in the accounts at the end of the year 1 and the reason i'm not bringing it into my proposal is because if I re-invest it, it will bring a return of £7,000... If I was you i would aim NOT to have too much in the accounts at any year end when your payments will be reviewed (unless it's already earmarked for something - machinery and the like), and certainly not at the end of year four!

Questions will also be asked if you are not paying yourself properly! Perhaps charging expenses instead of wages or bringing in £5k profit a month in the business but paying yourself £800 because your household I&E in your IVA shows that you pay anything over and above £500 to the creditors.

FortyTwo

Thanks Charco,

I'm not trying to "disguise" earnings - although I can see why allegations could be raised a lot of capital from scratch. I should point out that I will be keeping my main job on throughout this period for which I get between £12.5-13K.

The primary income as a sole trader will be approx £25 ph training whilst aiming to grow a web design business. One day I would like to go full time but would want a year or two salary up front to avoid making a bad mistake whilst losing my only income. I would also need to start saving towards some expensive computer equipment and eventually a work premises as it is against my rental agreement to run a business from home.

Are IVA assessors likely to be open to this at review. Payplan advised me that I did not need to tell them about opening a business account but only any profits I drew from it.

Thanks