IVA, Self Employed and Limited Company set up

Nickmh

Hi

I had a repossession with a big shortfall, plus other debts, and Payplan has recommended an IVA.

I've got no issue with it, seems all smart. But I've got a question.

I'm self employed, right now as a sole trader, and my earnings aren't huge, but there is potential for them to increase.

So if they do, I was thinking, can I set up a limited company, put a lot of costs through the firm and then pay myself not that much? I know it's taking advantage of the system to an extent, but I'm just wondering if it's viable or if there's something that will come and bite me later on?

Thanks for your input!

UpToMyNeckInIt

Hi Nick,

If your house has been repossessed, and assuming therefore that you have little in the way of assets to protect, have you looked at going BR instead? Might work out a lot cheaper. (Saying that, you will not be allowed to be a Director of your Ltd. Company if you do).

Assuming you proceed with the IVA:

'Going Ltd' is usually a good move, as your business becomes a legally separate entity to you, even though you are in full control.

I run my own Ltd Co, and am also in an IVA, and for me 2.5 Years in it is going quite well.

Your best bet, if you don't use one already is to employ the services of an accountant - a decent one will allow you to earn as 'tax efficiently' as possible based on your circumstances, and in my experience they more than justify their fees.

Regardless, your IVA firm will want to see your latest accounts at review time, and will calculate your disposable income based on your drawn 'salary' + 'dividends'. Although the company may be allowed to retain modest funds, you won't be able to 'hide' anything.

I would never advocate doing anything fraudulent (honestly, you will probably find as I did, that there are enough loopholes you can take full legal advantage of!!!). Putting legitimate business expenses / costs through is not taking advantage, but your legal right - so no worries there.

Bottom line in my case is that with my accountant's assistance, my on paper net 'profit' on which my IVA repayment is based, is about half of what I actually take home after taxes/expenses etc.

So yes, well worth looking into.

Good luck.

Nickmh

Yeah bankruptcy is an option, but I think my earnings will go up and I want to keep some level of control over my finances. With an IVA I can run my company and pretty much follow your example!

Cheers