Advice Please - Taking On The Family Business With Personal IVA?

Daisy4567

Hi,

My Mum is looking to retire and pass the family business over to me but I am in a personal IVA. The Business is a Trading As Company not a Ltd Company. She is concerned that the IVA Company (Grant Thornton) will see this as an asset and take money from it.

How will this work? How would GT work out what to take as payments and would this be based on profit or what my take home wage would be?

From research, I thought that it would be based on any profit the Company makes after tax? We are only a small business and don't have a huge turnover as it is.

Surely GT can't solely see the Company as an Asset and 'take it' if she were to do this?

UpToMyNeckInIt

I too run my own business and am in and IVA, so I hope I can offer some half-decent advice.

What is the business exactly?
Are you currently involved in the business, and drawing an income from it?
Are there any valuable assets such as property, machinery or vehicles that you wish to protect?

You are right to be concerned: As the business is currently a partnership/sole trader arrangement, any ‘after acquired assets’ that are realised by you inheriting the business may be up for grabs so to speak (particularly if you have not had them specifically excluded in your IVA paperwork). Therefore these assets essentially become ‘yours’.

The first thing I suggest is you and your Mother having a chat with her accountant (I assume she has one?), to see how best to protect the business going forward.

To safeguard any applicable assets, my first thought is to get the business set up as a ‘Limited Company’ (as I have done with mine). That way, the business becomes a legally separate entity to you as an individual, but you still have full control. This is easy and cheap to do – especially with assistance from your accountant.

Before she retires, and whilst your Mother is still the proprietor (‘director’ if she goes Ltd), get her to set up the associated business bank accounts (you will struggle to do this given the impact the IVA has on your credit rating).

Next is the income (This applies regardless of whether or not the company is limited): GT will as you surmise, work out your income on ‘taxable profit’ + any other income: eg. Tax-free personal allowances etc. based on the most recent accounts and/or cash-flow forecasts, and adjust you IVA payments accordingly. Dependant upon how drastically your source of income changes, you may be required to complete a new income/expenditure assessment as well.

I hope this provides you with some idea of what to do next. Hope it all works out for you, and let us know how you get on.

Daisy4567

Hi, thanks for your reply.

We are a Specialist Cake Decorating Business. There are no vehicles/machinery etc only a rented premises and the equipment inside to make and decorate the Cakes. Unlesss of course mixers etc fall into the category of machinery?

You mention being Ltd but I have done much reseearch and have only found that I could not be a Director of a Ltd Company whilst on an IVA?

Daisy4567

P.S. I currently receive an hourly PAYE wage. I have worked full time within the Company for about 6 years.

UpToMyNeckInIt

...I don't know where you have got your information.

You most definitely CAN be a director whilst in an IVA. I am Managing Director of my company. It is one of the huge advantages over going bankrupt (if BR you are not allowed to be a company director).

In your case (regardless of whether or not you go ltd), all that will happen I suspect is: Being the 'boss', your income will go up, and after the first 10% increase, 50% of any extra income will have to go into the IVA.

Make sure you properly review any additional expenditure that you may incur after your pay-rise, to off-set any possible uplift in IVA payments: Have a look at the 'Stepchange Budget Guidelines', and make sure you are claiming all of your applicable allowances: hairdressing, hobbies, childcare, pocket money, sports/hobbies, newspapers/magazines, sky TV package etc... are all catered for.

The following link takes you to the latest version that I can get hold of (or PM me and I can email them over):

https://docs.google.com/file/d/0B7LabJy69BP1M0gxeHQ1SDFiN1E/edit?pli=1

Have I provided enough advice for a free cake yet?

adyj73

I personally would ask your mum to hang on as Company Director until your IVA completes....