HMRC tax arrears within BR and allowable car valuation

thinkpositive1

I am on the verge of petitioning for BR having finally reached that point where this, with regret, is my best option to start afresh after 2 years on a DMP and then 3 on an IVA compounded by a sharp decline in my income.

I have been getting a lot of good advice but can't get clarity on 2 key issues:

1. HMRC tax arrears - I have an unpaid tax bill (I am self employed) of approx. £2.5K relating to the 2011-12 tax year. My recent tax return (for 2012-13 tax year) will add a further £2k or so to that.

The advice (from a solicitor specialising in BR) I have had is that he is almost certain the tax arrears relating to both those years PLUS the tax that will be due for this current tax year (ending April 2014) - which won't be due til next January - can all be included within the "bankruptcy estate".


Is that right? Or is it one of these 2 scenarios:

• to include any tax I have yet to pay on income generated up to and including the date I petition for BR?

• to include tax due from formally lodged tax returns? i.e. that last one being for the tax year ending March 2013 and anything that will be due from the April 2013-March 2014 accounting year will become payable as normal?

2. Keeping my car - what value allowed?

I have a car that was quite pricey when I bought it new 10 years ago but is now worth £4k to £5k according to car valuation guides.

I read that ORs can vary in what they allow you to keep when it comes to a car. The guidelines mention if OR forces sale of car then £1k allowable to purchase a replacement. But the advice I have had from 2 "experts" in BR say I shouldn't worry too much with a car worth £4k to £5k as the OR would not want the hassle of taking this off me and getting a low price at an auction.

They seem relaxed about the car issue and say it's a judgement call but ORs would only really be interested if it was of a higher value (but there is no specific threshold / guide on what that value would be).

Anyone able to advise?

I am going to get a couple of quotes from car dealers I think as for anyone to buy it as it is now, there is quite a lot of work needed to sort out various scratches and scrapes, a new full set of tyres (min cost £600 for a full set) and car service imminent which I think would entail the best of £1k to keep it on the road.

If anyone bought at some point they might want to sort the bodywork issues out at an estimated cost of a further £1k for the bodywork (which I have been unable to afford for years to sort).

Does any of that get taken into consideration by the OR? Info I have come across seems to suggest ORs just use the Parker's Guide and that's that.

Flyright

The OR will look to take a vehicle of that value for the benefit of the bankruptcy estate.

macbabypam

If you think current value is £4-5k then OR would look on it as a healthy asset. From what you say you would probably be better off with a cheaper, realible and more roadworthy car than what you have.

You can try to negotiate with the OR about keeping the car if you really want to but ultimately it's up to them to dispose of your assets for the benefit of your creditors.

TheGardener

Although the OR has to realise as much as possible for the creditors - I am given to understand that should your vehicle be important for you to earn an income - i.e. a van or vehicle required for high mileage or a certain status is needed to maintain your creditability when promoting your self-employed work (e.g. who would employ an undertaker who turned up in a jalopy?) then there is scope for negotiation with the OR.

However, if you think its likely to cost so much to keep on the road and none of the above examples apply - it might be wise to get rid of it anyway and get a disposable banger - . Mine cost less than £2K 5 years ago and has still passed its MOT every year etc with very little extra expense.

I think you are right - get some quotes from local dealer and if you think you could make a strong argument for keeping the one you have then make your case to the OR.

Worcsman

About the car.. sell it before you go BR, I did, got 7 k and used it for getting a rental house amongst other stuff. The OR was OK with it. asked why I sold it and what I had done with the money.

bigjl

Unless you needed the car for work purposes.

Eg You are a chauffeur

Then i would expect them to ask you to sell it.

Any work needed to it would be irrelevant i would have thought.

I doubt they would sell a car worth under £1000 or so.

As soon as you are bankrupt it isn't your car anyway is how i was told to think about it.

If you sell it soon before going BR then you will need to explain why and for how much i believe. In case they consider it, i think, deprivation of capital.

dojoman

These so called "experts" have not got a clue what they are talking about, seek advice from one of the debt charities asap otherwise you are in for a big shock.

woodformoretrees

dojoman wrote: »

These so called "experts" have not got a clue what they are talking about, seek advice from one of the debt charities asap otherwise you are in for a big shock.

A shock about the car, the tax, or just in general? Your post is a little scary without further clarification.

Anondebtadvisor

As other posters have said the OR will consider this car an asset and give you £1000 for another car.

Sometimes people make the mistake of taking advice from accountants who say they have knowledge of bankruptcy, in my experience accountants know very little about bankruptcy its administration

thinkpositive1

dojoman wrote: »

These so called "experts" have not got a clue what they are talking about, seek advice from one of the debt charities asap otherwise you are in for a big shock.

I am doing so this afternoon, face to face, an appointment I had to book over 6 weeks ago. Taking note of the "do you need this for work" line of enquiry, yes I do. Many clients of mine are in rural areas and if I had to rely solely on buses and trains to get to meetings, my business would be totally stuffed. You can see why I am after clarity though, as there is conflicting advice and info out there:

• the "experts" (one is a solicitor and bankruptcy specialist) are saying I don't have much to worry about with a 10 year old car of that value (£4k to £5k), also quoting the "hassle factor" for an OR to take the car and sell it on knowing they'd get a rock bottom price at auction and the sheer admin headache it would cause
• the official guidelines seem to say anything over £1,000 would be considered an asset and / or could force a sale and then give me £1k back to go and buy a replacement vehicle
• other guidelines I have seen mention a £2k threshold
• others say unless over £500 could be raised by sale to be distribute to creditors then they won't touch it.

As for selling the car before petitioning for BR, we have advice saying that would need to be declared if sold within 3 months prior to going BR, within 12 months prior (this seems to be the guide on SOA form) and other advice saying declare it if sold within 2 years of petitioning BR. Then we have feedback in the thread saying someone sold their vehicle worth £7k prior to BR and the OR had no problem with that!
So it appears there are no hard and fast rules but I will check this at my meeting today with the debt advisor and may follow up.

I appreciate ORs may have discretion on a lot of things but I want to go into BR knowing exactly where I stand on such issues, or as close as I can to knowing what the rules and thresholds are likely to be.

JCS1

thinkpositive1 wrote: »

I am doing so this afternoon, face to face, an appointment I had to book over 6 weeks ago. Taking note of the "do you need this for work" line of enquiry, yes I do. Many clients of mine are in rural areas and if I had to rely solely on buses and trains to get to meetings, my business would be totally stuffed. You can see why I am after clarity though, as there is conflicting advice and info out there:

• the "experts" (one is a solicitor and bankruptcy specialist) are saying I don't have much to worry about with a 10 year old car of that value (£4k to £5k), also quoting the "hassle factor" for an OR to take the car and sell it on knowing they'd get a rock bottom price at auction and the sheer admin headache it would cause No hassle at all, you send fax to agents and they do the rest.
• the official guidelines seem to say anything over £1,000 would be considered an asset and / or could force a sale and then give me £1k back to go and buy a replacement vehicle Correct
• other guidelines I have seen mention a £2k threshold Revised a while ago, as £2k but reduced
• others say unless over £500 could be raised by sale to be distribute to creditors then they won't touch it. Not true - I've known of scrap cars being taken

As for selling the car before petitioning for BR, we have advice saying that would need to be declared if sold within 3 months prior to going BR, within 12 months prior (this seems to be the guide on SOA form) and other advice saying declare it if sold within 2 years of petitioning BR. Then we have feedback in the thread saying someone sold their vehicle worth £7k prior to BR and the OR had no problem with that! As long as you can show how much it was sold for and what you did with the proceeds it should be fine (though depends on what proceeeds were used on!)
So it appears there are no hard and fast rules but I will check this at my meeting today with the debt advisor and may follow up.

I appreciate ORs may have discretion on a lot of things but I want to go into BR knowing exactly where I stand on such issues, or as close as I can to knowing what the rules and thresholds are likely to be.

Comments in red above,