IPA payments and whatnot

Denzel1989

Hello all,

Im self employed and in the midst of a tax investigation, the resulting costs incurred with my existing debt means bankruptcy is imminent.

My question is if an IPA is requested by the OR do they take all your disposable income or just a portion of it?

Next question, i thought a few weeks ago that continuity of work looking forward was looking well so i repaid a good friend of mine £2500.00 that he had lent me last year. I also took out some more credit (bad move) in order to fix my van and cover some other business costs....around 2k would the OR not like this? I had no idea of the tax investigation back then.

TBH i doubt that i will get an IPA (maybe someone can correct me here), i plan on staying self employed doing what i do, there is little work about but basically do whatever i can whenever i can and keeping my few remaining customers happy, and as my parents are kicking me out my expenses are only going to go up also!

Thanks.

dojoman

DanielN1989 wrote: »

Hello all,

Im self employed and in the midst of a tax investigation, the resulting costs incurred with my existing debt means bankruptcy is imminent.

My question is if an IPA is requested by the OR do they take all your disposable income or just a portion of it? It used to be a percentage but now they take it all.

Next question, i thought a few weeks ago that continuity of work looking forward was looking well so i repaid a good friend of mine £2500.00 that he had lent me last year. I also took out some more credit (bad move) in order to fix my van and cover some other business costs....around 2k would the OR not like this? I had no idea of the tax investigation back then. This will depend on whether the OR comes to the conclusion that you were insolvent at the time, if they do they can try and retrieve the money from your friend.

TBH i doubt that i will get an IPA (maybe someone can correct me here), i plan on staying self employed doing what i do, there is little work about but basically do whatever i can whenever i can and keeping my few remaining customers happy, and as my parents are kicking me out my expenses are only going to go up also!

Thanks.

Hope this helps....

alastairq

My question is if an IPA is requested by the OR do they take all your disposable income or just a portion of it?

The current Insolvency Service rules [not enshrined in Law]....are, in essence...if a surplus exceeding £20 per month is identified, then the whole amount of surplus is claimed.

The OR can go back 5 years [or more, if needed] to examine financial transactions.

Thus, there is a possibility the OR may re-claim your friend's re-payment.

Much will depend on how much of a paper trail is associated with that payment?

[One cannot be expected to go through life planning on the off-chance one may be petitioned BR at some point in the next 5 years, however.]

Denzel1989

Ok thanks! There isnt much of a paper trail for the money borrowed of my friend, out of interest why does this matter?

What about the debts i have acquired in the past few months? Will the OR not like this?

Action_Jackson

DanielN1989 wrote: »

Ok thanks! There isnt much of a paper trail for the money borrowed of my friend, out of interest why does this matter?

What about the debts i have acquired in the past few months? Will the OR not like this?

The paper trail matters because it would allow the OR to see that you favoured a creditor. If you were insolvent at the time, they won't be too happy, but my understanding is that they only try and recover amounts £5k and over. On your SOA, regardless of paper trail, it will ask whether you've done anything like this, and they expect honest answers.

As long you didn't take the credit knowing that you were unable to pay it back, then you should be fine, especially as it was for business related costs. As you say, the credit was taken out before the tax investigation.

However, if the OR decides that neglect of your tax affairs was the cause of you going BR, then you might be up for a BRU/O. A BRU/O extends your BR restrictions (not being able to be a company director etc.) for a longer period, even though you will still be discharged after 12 months. Even with a BRU, you can still acquire property after the 12 months with no obligation to your creditors.

The 3 years (from signing) IPA is a separate issue, and you'll only get one initially if you have more than £20 disposable income per month. If an IPA isn't started within the 12 months, then one cannot be started afterwards.

Denzel1989

I dont think they can come after me with a bru/o due to my tax affairs as all my accounts and returns where handled by a book keeper with accounts kept on sage and then my year end handled with an accountancy firm. I think/hope i should be ok here.

I also took out some credit with littlewoods, some stuff for home and some clothes which at the time i somehow justified (hangs head in shame) thinking that the work we had coming would easily cover it. Anyway the lucrative projects we had coming up have been cancelled. If they see this as wrong, what do they do? Criminal charges, not include it on the bankruptcy?

With regards to the IPA, i am in minus figures at the minute even with basic living costs as work is terrible, winter is on its way and it will only get worse.

Thanks for your help.

Action_Jackson

DanielN1989 wrote: »

I dont think they can come after me with a bru/o due to my tax affairs as all my accounts and returns where handled by a book keeper with accounts kept on sage and then my year end handled with an accountancy firm. I think/hope i should be ok here.

I also took out some credit with littlewoods, some stuff for home and some clothes which at the time i somehow justified (hangs head in shame) thinking that the work we had coming would easily cover it. Anyway the lucrative projects we had coming up have been cancelled. If they see this as wrong, what do they do? Criminal charges, not include it on the bankruptcy?

With regards to the IPA, i am in minus figures at the minute even with basic living costs as work is terrible, winter is on its way and it will only get worse.

Thanks for your help.

Oh, I thought the tax investigation had unearthed something that was causing you to go BR.

A bit of credit from Littlewoods based on the assumption of more work is not worthy of the fraud squad The debt will be included in the BR. I don't think criminal charges are considered unless deliberate and serious fraud has been committed.

The OR might want to review your income periodically during the 12 months (in practice, maybe once or twice) to see if an IPA is worth considering, and you need to keep them informed of any changes to your income. As you're self employed, they'll probably look at your average income over a few months - they have to take into account business expenses, tax and NI. When you're self employed, you don't get a zero tax code like PAYE BRs.

Denzel1989

You are a star, Thankyou

Just been to my accountants and outlined the situation to him, after i explained what i was thinking and the implications that go with BR he just simply said thankyou for letting me know, do it asap and dont worry about the money you owe me from the investigation and my year end fees, we will sort it somehow.

He just said you own nothing, no assets, children, house or wife, you cant buy a house anyway as your skint so its pointless worrying about a mortgage and to even save the amount required will take you years.

Denzel1989

sorry double post

Action_Jackson

DanielN1989 wrote: »

You are a star, Thankyou

Just been to my accountants and outlined the situation to him, after i explained what i was thinking and the implications that go with BR he just simply said thankyou for letting me know, do it asap and dont worry about the money you owe me from the investigation and my year end fees, we will sort it somehow.

He just said you own nothing, no assets, children, house or wife, you cant buy a house anyway as your skint so its pointless worrying about a mortgage and to even save the amount required will take you years.

Not sure what he means by 'sort it out somehow'. You can't favour one creditor over another, and during BR you can't make any payments to creditors yourself.

Being self employed, reasonable payments to an accountant are a legitimate business expense I guess, although if the OR suspected you were paying off any pre-BR debt as opposed to payments for new work, there could be trouble.