Tax Credits/ State Benefits and Bankruptcy

savagevixen

This may help...

31.7.7 Income sources which can be included in the IPA/IPO calculation

Various income sources available to the bankrupt can be considered by the official receiver/trustee when making an IPA/IPO calculation, as follows :

*

Employment and self-employment - see paragraph 31.7.8
*

State benefits - see paragraph 31.7.9
*

Arrears of benefits received post bankruptcy - see paragraph 31.7.10
*

Pension Receipts - see paragraph 31.7.11
*

Periodic payments in respect of loss of earnings/personal injury - see paragraph 31.7.12
*

Income arising from capital property- see paragraph 31.7.13
*

Tax refunds - see paragraph 31.7.14
*

Income arising from nil tax (NT) coding - see paragraph 31.7.15
*

Income received from spouse/civil partner/partner - see paragraph 31.7.16
*

Income from adult children and other adult members of household- see paragraph 31.7.17


31.7.9 State benefits

An IPA should not be sought where the bankrupt's only or main source of income is state benefit payments without any other significant source of income [note 3]. This applies even in the rare circumstances where the official receiver's analysis of the bankrupt's income and expenditure discovers sufficient surplus for an IPA arising as a result of the income received by the bankrupt which either solely or chiefly comprises state benefits. The official receiver should consider that it is always open to the bankrupt who wishes to contribute, to make voluntary payments. If the bankrupt was minded to contribute on a voluntary basis, having been informed that their income appeared to be sufficient to produce a surplus taking in to account their reasonable domestic needs, a voluntary agreement could be incorporated into an IPA, but it would have to be clearly noted that no enforcement action would be taken if the bankrupt failed to make agreed voluntary repayments.

This does not mean that the official receiver must exclude all benefit payments received by the bankrupt when calculating available income for an IPA. The person making the calculation (usually the examiner) should first consider whether there is income paid to the bankrupt not comprising state benefit . If this is the case, an IPA may be a possibility, and any calculation of income should include all available income, including state benefits which are paid to an individual for the general benefit of that individual and their family. The notable exceptions to this rule when dealing with state benefits are disability living allowance (which is not considered by the Department of Work and Pensions to be income) and child benefit. The High Court has stated as a matter of public policy that child benefit and similar benefits should not be included in the statement of income when applying for an IPO and there is no reason why this point should not be extended to cover IPAs. Whilst it is acknowledged that in the figures for expenditure there may be outgoings for the benefit of the children, at least to the value of the child benefit received, to ensure that there is no risk of them being deprived of it, child benefit should not be included in IPA assessments. The Department of Work and Pensions website provides useful information regarding allowances and benefits currently in force and can be accessed at http://www.dwp.gov.uk/

Where the bankrupt is in receipt of benefits and other sources of income, the total income should be established (see other income sources at paragraph 31.7.7) and the bankrupt's reasonable expenses deducted (see paragraph 31.7.19). An assessment can then be made as to whether the bankrupt is in receipt of income surplus to his/her reasonable domestic needs. If there is a surplus of income, this surplus should be less than or equal to income from the source other than benefits in order for an IPA to be sought. It should be remembered that whilst the bankrupt's total income including state benefits should be included in the calculation of surplus income, it is the income from sources other than the benefit(s) which is providing the payments under the IPA/IPO, the surplus income from which an IPA is sought should not be comprised of state benefit.



http://www.insolvency.gov.uk/freedomofinformation/technical/techmanvol1/Ch25-36/Chapter31/part7/part2/part_2.htm

alafraise

HELP!!


31.7.15 Income arising from nil tax (NT) coding

Where bankruptcy occurs, HM Revenue and Customs (HMRC - formerly Inland Revenue) submits a claim in the bankruptcy proceedings for the whole of the outstanding tax due in that tax year, for both employed and self-employed individuals. The claim submitted in the proceedings by HMRC is dealt with in the same way as any other unsecured creditor. As a consequence of HMRC submitting this claim for outstanding tax in the year of bankruptcy, where the bankrupt is employed on a PAYE basis, HMRC applies a nil or no tax (NT) code to the bankrupt's salary for the remainder of the tax year in which the bankruptcy order was made. The NT code is applied to all income earned by the bankrupt after the bankruptcy order date, either until such time as there is a change in the bankrupt's source of income, or the tax year in which bankruptcy occurs comes to an end, whichever event is the earliest. This means the bankrupt does not pay any tax on his/her income whilst the NT code is in force and is thus in receipt of additional income to that received prior to the application of the NT coding.


Would this extra income be included when working out surpluse income

Reason I'm asking is i pay aroung £175 pm tax
This would put me well and truly over the £100 mark

Or am I reading it wrong

savagevixen

alafraise wrote: »

HELP!!


31.7.15 Income arising from nil tax (NT) coding

Where bankruptcy occurs, HM Revenue and Customs (HMRC - formerly Inland Revenue) submits a claim in the bankruptcy proceedings for the whole of the outstanding tax due in that tax year, for both employed and self-employed individuals. The claim submitted in the proceedings by HMRC is dealt with in the same way as any other unsecured creditor. As a consequence of HMRC submitting this claim for outstanding tax in the year of bankruptcy, where the bankrupt is employed on a PAYE basis, HMRC applies a nil or no tax (NT) code to the bankrupt's salary for the remainder of the tax year in which the bankruptcy order was made. The NT code is applied to all income earned by the bankrupt after the bankruptcy order date, either until such time as there is a change in the bankrupt's source of income, or the tax year in which bankruptcy occurs comes to an end, whichever event is the earliest. This means the bankrupt does not pay any tax on his/her income whilst the NT code is in force and is thus in receipt of additional income to that received prior to the application of the NT coding.


Would this extra income be included when working out surpluse income

Reason I'm asking is i pay aroung £175 pm tax
This would put me well and truly over the £100 mark

Or am I reading it wrong

Some of the others no more about this, but if you are made Bankrupt before Nov in the Tax year, you have to pay all the tax to the OR (correct me if I am wrong someone) and after Nov there seems to be a funny loophole where the tax isn't taken away but left in the pay packet. Mike St Helens knows about this I am sure.
We went BR on 23rd March-so right at the end of the Tax year lucky for us.
I don't think its counted as your income, I think it's taken by the OR.

alafraise

I went bankrupt today so got the rest of the tax year to go

Get a normal pay increase in Sep (it mentions something about salary increase) so may stop then

Hopefully