NT tax code -- why?

wolfers

Flyright wrote: »

the legislation is something of a minefield

Well, yes, it's not very helpful. It says you can't be involved in the "management" of a company, but what does that really mean. The company I ran is so small and simple there wasn't really any managing to do. The problem is that the rule applies to all companies -- multinationals and the little one I had -- equally, yet all companies are not equal.

I think I'm OK. The OR said he was happy and there's no fraud or anything dodgy going on here. I originally planned to shut the company down, but I was reluctant to do so because (a) I'd then have to be self-employed and finding a bank would be really hard and (b) I'd find it harder to get work because the name of my company is reasonably well-known locally. So forcing me to become self-employed would make my finances more difficult and that's not in anyone's interests.

debtinfo

hi, wolfers, i will try and explain what is going on.

HMRC used to have preferential treatment in bankruptcy, a few years ago they decided that they should have equal standing with all other unsecured creditors.

They decided that they would not deduct tax from your wages but instead it would go to the OR and into your bankruptcy estate. From there it would be dispersed along the rules of bankruptcy that is, the OR's fees first, then preferential creditors, then non preferential creditors on a pro rata basis, one of which is HMRC. Any tax that is not recovered would be treated as an usecured debt and written of like the rest

wolfers

debtinfo wrote: »

HMRC used to have preferential treatment in bankruptcy, a few years ago they decided that they should have equal standing with all other unsecured creditors.

Thanks for the explanation, but that's crazy, isn't it? Why on earth would the government agree to that? Effectively they are subsidising the paying off of my creditors. My creditors voluntarily took a risk when they loaned me money. Why should the government pay for that?

debtinfo

Then again, the unsecured creditors used to think it was very unfair that if they cashed in some of your assets that HMRC got paid first in ye olden days, so you cant really make everyone happy

wolfers

But I don't owe HMRC any money. I don't owe any taxes. The OR will be taking money from future earnings, that is surely due to HMRC and giving it to banks instead. And there's barely a point to it as it's going to be quite a small sum anyway.

JCS1

The OR's fees get paid first though, and they start at £1,700 (ish), so it's more a case of diverting money from HMRC to the IS.

debtinfo

which is the government anyway

wolfers

Can I just clarify things.

Based on my income and expenditure the OR said there was no scope for an IPA, but he's going to arrange an NT tax code and I'm going to pay a fixed amount that we agreed each month till April. At some point my SOA will be updated, but I don't expect much to have changed and so there'll still be no scope for an IPA based on that.

Except debtinfo said that the tax thing is an IPA.

Here's my worry. Say I get AD on 15th June 2011 and then I get a great job on a decent salary on 16th June 2011. Will the tax IPA count so that, even though I'm discharged, I can be assessed on the new job and have to pay x amount for two (three?) years after the AD?

Oh, and slightly related. At the moment my expenditure exceeds my income. This is fine because I have a nine month fixed term contract starting in October so that, over the course of the year, my income and expenditure balance. When I'm reassessed will that fixed term contract be pro-rated (so that, as I say, taking the BR year as a whole I have no surplus) or will it stand on its own (in which case I may well have a surplus and perhaps subject to an IPA).

debtinfo

no, if you have completed your NTIPA and you have been discharged and afterwards your income increases you will not be given a surplus IPA.

Interestingly though, if you had say paid 10 months of a NTIPA and then your income changed so you had a large surplus before you were discharged and they decided on a surplus IPA, the surplus IPA could only be for a further 26 months as 10 months of an IPA had already been completed

I dont think it would be prorated as you could get ither work during the other 3 months