Newbie!! Possible IVA with Self Assessment Partnership HMRC debts

Lugalugs

Hi everyone!

Newbie here but feel as though I know you all anyway because of the amount of time I have spent on this site!

Just wondered if anyone knew the answer to my question as I have looked everywhere and can't seem to find the answer.

If I include my HMRC Self Assessment tax debts in my IVA in relation to my split of profit from my partnership income can HMRC ask my business partner to pay my share or is it my debt only? Also does anyone have any experience of IVA with HMRC?

Also my accounts year end is 31 May therefore my year ended 31 May 2013 is for tax year 2013/14 and 31 May 2014 is for 2014/15. Can I include both years in any IVA I am thinking about entering?

Really confused and would (as always) appreciate your feedback.

Thanks

:doh:

UpToMyNeckInIt

You might need to speak to your accountant for a definitive answer, but my first thought is that HMRC will treat each party of the partnership jointly and severally liable for the debt.

So if you enter an IVA, HMRC may be entitled to recover the tax/NI owed by 'the partnership' from the other partner(s).

No different really to how a bank may treat a joint account overdraft in IVA situations.

Lugalugs

Thanks a lot for your reply. I've asked my accountant but they do not know but will try and look into it for me.

Thought that there may be someone out there in a similar position.

Hopefully will get some other replies too.

longtermplanner

You need to talk to a good IP about this, not one of the off-the-shelf pile em high merchants.

I wouldn't assume your accountant can find the answer either.

Have a look at https://www.iva.co.uk. Post your question there are see who answers, there are a lot of IP's who post there.

nb I have no idea if you are suitable for an IVA. Partnership assets may well be a good reason. But if you have a house, be very very suspicious about the 2014 IVA protocol clause referring to secured loans. It may well be better to take the tough decisioon and sell the house now, arther than face an extortionate rate secired loan in 5 years time.

Lugalugs

Thanks for that advice


I have done the budget on step change and they have advised an IVA. Although I am in a partnership I am a salaried partner and although have a "capital account" this does not actually reflect my equity in the business.



I am a homeowner but there is very little equity in it at the moment, my mortgage is currently 95% ltv.

I have approached a local IP who did not really recommend either way IVA or bankruptcy but said it was up to us. Also they asked for 3 monthly payments up front. Is this usual?

longtermplanner

No it isn't usual any more to have to pay fees up front, I would avoid this IP as there are plenty who won't have this extra hurdle..

Your question about tax is relevant not just to an IVA but also to bankruptcy.

If you don't have assets in the partnership this is a good reason for an IVA that doesn't apply to you.

The fact there is lttle equity in your home at present doesn't mean there will be in 5 years time, so you do need to consider the secured loan clause seriously, you shouldn't cross your fingers and hope it won't happen to you.

If you have little equity at present, then have you looked into bankruptcy? If the house is in joint names but it's only you going bankrupt, your partner may be able to 'buy back' your half of the equity from the OR. Perhaps parents could help out with this?

Lugalugs

We touched on bankruptcy during the interview with the IP but just for my husband initially.

Do you think that we may be being pushed into an IVA because of the fees rather than them looking at our overall situation?

Not quite sure what you mean about the secured loan position? may need some more research but it is difficult as my husband has recently lost his job and payments are being missed for the first time!!

UpToMyNeckInIt

My IVA was with an up-front fee-charger. Check out a review site such as IVA.com, and speak to a couple of other firms - most of whom do not charge anything up-front.

Speak to a couple of other IP's, the CAB, Stepchange and National Debtline, to get a range of opinions from both the government agency, the creditor-funded charities, and the private sector. That way you will get all perspectives, and be better placed to make a decision.

Whatever you do, do not 'rush' into an option.

What longtermplanner eludes to is that most IVA's require homeowners to (subject to a property valuation in Month 54 of the IVA), attempt to release equity via remortgage (or secured loan with the advent of the 2014 protocol), up to 85% LTV to increase creditor dividend up to 100p in the £. (This is subject to the resulting payment being max. 50% of you current IVA payment for affordability reasons, not extending beyond retirement age and the life of your existing mortgage). It goes without saying that the other usual affordability criteria apply such as limitations based on multiples of household income etc.

Personally, in a rising house market, I would not rush into a house sale. My properties have made more money than me, increasing my equity by more than £100K in the 2-Years that my IVA has been in place. But even though out LTV is c75%, our mortgages are 7x our household income, so nobody is going to offer me any more secured lending in a hurry.

Indeed the reality is that, for most IVA customers, equity release is not possible, so your IVA goes on for a 6th Year instead (which usually works out a lot cheaper). If anything, with the implementation of the new, more stringent mortgage/secure lending rules, most of us wont stand a snowball's chance in hell of getting a remortgage/further secured borrowing (unless you have stacks of equity of course and a very high disposable income).

But who knows what the economic climate will be like in 4-5 Years time?