Income tax priority?

Semantic

I owe HMRC a lot (~£30,000) that I've agreed to pay them off at £2,000 a month over the next 15 months, leaving me with £1-200 a month after living expenses (necessary buffer as I have a disabled child).

I have lots of other debts (~£40,000) that I was servicing at £1,500 a month, what should I do with these now? Offer token amount (£1) until the Tax bill is paid off as my monthly excess is now £200 or so? Or do I try to ask HMRC to lower the tax bill and pay toward debt? After the tax bill is done I should be able to divert the £2000 toward the debts and pay them off in a couple of years.

Some of these are defaulted, others are late, so credit rating is gone for 5 years anyway. No CCJs so far, if I explain the tax priority debt and send a copy would anyone apply for a CCJ do you think (I work in financial services, CF 30 FSA approved person so CCJ could be rather annoying). If they did, would it stick (renting, no assets except car necessary for disabled child)?

Thanks!

antonic

Before I can help. I need the following information from you;

1) What type of debt is is it ? (VAT/PAYE/SA/CIS/CT) ?

2) Is it a personal debt for you as an individual, or as a partner in a partnership or as a director of a Limited Company ?

3) When you agreed the repayment plan did you provide FULL Income & Expenditure details or agree a random figure ?

If you can answer these questions, I will see if I can help you

BUT you do need to know that IF you do default, HMRC may well take recovery action against you.

This action can include :
1) A distraint call to levy on goods to pay the debt
2) If insufficient assets County Court proceedings or Bankruptcy (if an individual or partner) or
3) Winding up proceedings (if a Limited Company).

Semantic

1. Self employed income tax for a period in 2010, have been PAYE since
2. Personal debt from being a partner in an LLP
3. I did an income and expenditure to work out how much I could afford but did not send it to them (did offer), just suggested £2k/month and they said it was fine

I am a director in my current limited company (own less than 5% equity, unvested so cannot be sold) and we have sufficient cash to keep me employed until the end of next year even if trading goes badly, so not too worried about defaulting on tax bill, just on CCJs from other debts!

antonic

Semantic wrote: »

1. Self employed income tax for a period in 2010, have been PAYE since
2. Personal debt from being a partner in an LLP - If you are the only solvent partner you could be made bankrupt for the whole debt
3. I did an income and expenditure to work out how much I could afford but did not send it to them (did offer), just suggested £2k/month and they said it was fine - If you are to make a revised offer send it in and explain why you need to revise your offer downwards

I am a director in my current limited company (own less than 5% equity, unvested so cannot be sold) and we have sufficient cash to keep me employed until the end of next year even if trading goes badly, so not too worried about defaulting on tax bill, just on CCJs from other debts!

I would be worried about defaulting on your tax bill, because once you do HMRC can make very difficult for you and you may it find hard to renegotiate a new (and lower agreement).

Semantic

Thanks, no longer a member of the partnership, left in 2010. Now employee/director in a limited company with some unvested shares.

I put all of my disposable income toward the tax bill so it can get paid off as soon as possible due to their ability to bankrupt etc.

Reducing the £2k per month would give me the ability to pay other creditors more than a token amount, but is this necessary/sensible to avoid CCJs? I can't imagine a judge would tell me to pay less to HMRC and more to unsecured creditors/not pay other priority debts? If a CCJ did get put out, could it be shot down on this basis?

antonic

Semantic wrote: »

Thanks, no longer a member of the partnership, left in 2010. Now employee/director in a limited company with some unvested shares. Is the partnership still going ? are you the only solvent partner ? - because if you are you can still be pursued for any debts accrued BEFORE you left the partnership.

I put all of my disposable income toward the tax bill so it can get paid off as soon as possible due to their ability to bankrupt etc. - thats the right choice !

Reducing the £2k per month would give me the ability to pay other creditors more than a token amount, but is this necessary/sensible to avoid CCJs? I can't imagine a judge would tell me to pay less to HMRC and more to unsecured creditors/not pay other priority debts? If a CCJ did get put out, could it be shot down on this basis? Not sure about that

Good luck !