inland revenue

worried123

Hi all

Sorry - it is me again with yet anther query.

I have my OR interview next week now....however I have spokent to the OR and nearly every day there seems to be an e-mail from him wanting to know something....I shall be glad when it is all over with to be honest. How can you possibly know without statements infront of you where every last expenditure went!!

I was always under the assumption that any debts to the inland revenue could not be dropped/cleared with bankruptcy and you had to continue paying them.....Several years ago I was told that I was entitled to working tax credits....like half the people who have ever claimed them I was told that I had been overpaid and have been paying it back at a certain amount each month...they also say there is another amount going back a few years that might have to be paid back later as well.....(I wish that I had never bothered applying for them in the first place to be honest!!) - Also, with all of this papers and statements finding etc I have realised that I did not declare a small private pension that I cashed last year...I have told the OR about this and explained that once I do inform the inland revenue I will need an amount for monthly payments to the inland revenue in my expenditure.......Are inland revenue payments - which I suppose that you could call debts - cleared in bankruptcy at all (i personally do not think they are) and if they are - would it wipe out the amount that I inadvertently did not declare to the inland rev when I took that lump sum pension?????Just a thought anyway....

I would appreciate if anybody knows at all.......Best wishes. Thank you.

DEBTMONKEY1A

Hi-I'm sure someone with more technical knowledge will be along soon. I owed a lot of tax/ni going back a few years-this is all written off/included in the BR. try posting this on the 'ask the expert' section of the debthelpuk forum-simon wiggins who posts on there (he is an insolvency practitioner/money advisor) I'm sure will know.

rog2

Hi worried - I was declared bankrupt by HMRC (Inland Revenue) and all my Tax Debts (Inland Revenue and VAT) were included in my bankruptcy.
What you MAY be getting the emails for is that your Tax code, for your bankruptcy period, will be changed to a 'zero' code. Any tax that would normally have been due would, then, go to the OR for distribution to your creditors.
I'm sure fermi will clarify things.

fermi

rog2 wrote: »

I'm sure fermi will clarify things.

Maybe. But there seems to be at least two or more issues here?

Firstly tax credits:

worried123 wrote: »

Several years ago I was told that I was entitled to working tax credits....like half the people who have ever claimed them I was told that I had been overpaid and have been paying it back at a certain amount each month...they also say there is another amount going back a few years that might have to be paid back later as well.....(I wish that I had never bothered applying for them in the first place to be honest!!)

Tax credit overpayments and bankruptcy are confusing, but the only clear bit of info I have found is:

Where tax credits have been overpaid and a bankruptcy order is subsequently made against the claimant, whether or not the overpayment is a provable debt in the bankruptcy depends on the circumstances of the case as follows:

Final award notice (of repayment) issued before the date of the bankruptcy order.

• If the recovery is made, or would have been made, by direct collection (in cases where there is no ongoing award of tax credits), HMRC will submit a proof of debt in the bankruptcy, considering the debt to be a provable one.

• If the recovery is made, or would propose to have been made, by deductions from ongoing awards of tax credits, HMRC will not submit a proof of debt in the bankruptcy but will continue to make the collections from the ongoing award of tax credits until the bankrupt’s discharge from bankruptcy. Thereafter the balance of the debt will be written off. This action, of continuing to recover the debt post bankruptcy, follows the decision in the case of R v Secretary of State for Social Security, Ex Parte Taylor and Chapman [note 1] which provided that where a bankrupt was indebted to the Secretary of State for Social Security in respect of debts arising from earlier receipts of social security benefits, he/she was entitled to deduct sums from future benefits to be received thereafter in reduction of that indebtedness. Should any bankrupt object to the taking of the ongoing recovery action by HMRC in this way, they should be referred to that Department without further comment by the official receiver.
  
  In all cases where a final award notice (of repayment) has been issued by HMRC before the date of the bankruptcy order, the debt should be added to the list of creditors and HMRC treated by the official receiver as a creditor in the usual way.

Final award notice (of repayment) issued after the date of the bankruptcy order.

• Where a final award notice (of repayment) is issued by HMRC after the date of a bankruptcy order, whether the recovery action be considered by direct collection or from the ongoing award of tax credits, the bankrupt will be pursued by HMRC in the usual way even though the over-paid tax credits arose before the date of the bankruptcy order. This follows the decision in R (on the application of David William Steele) v Secretary of State for Work and Pensions [note 2]. In these circumstances the debt will not be included in the list of creditors. See also Chapter 40 Part 6 - Creditors and liabilities.

Should the official receiver require information on how HMRC intends to treat tax credit overpayments in individual voluntary arrangements, the official receiver should contact Technical Section directly for this information.

77. 51 Set-off and joint claimants
Where appropriate, HMRC will claim set-off in respect of monies it owes to the bankrupt to reduce or extinguish the indebtedness for overpaid tax credits [note 3].

Where tax credits have been claimed by two persons, HMRC will pursue the non-bankrupt person, if any, to recover the overpayment and if the intended recovery procedure is direct collection, it will also submit a proof of debt in the bankruptcy (as appropriate) (see paragraph 77.50), but it will not recover more than 100p in the £ of its debt (from both sources). Where the intended recovery action is deductions from ongoing tax credits, that will continue as far as the non-bankrupt claimant is concerned but a proof of debt will not be submitted in the bankruptcy. This follows an operational decision made by HMRC.

The trick is to work out which bit of all that applies to your situation.:rotfl:

Tax owed from pension.

worried123 wrote: »

Also, with all of this papers and statements finding etc I have realised that I did not declare a small private pension that I cashed last year...I have told the OR about this and explained that once I do inform the inland revenue I will need an amount for monthly payments to the inland revenue in my expenditure.......Are inland revenue payments - which I suppose that you could call debts - cleared in bankruptcy at all (i personally do not think they are) and if they are - would it wipe out the amount that I inadvertently did not declare to the inland rev when I took that lump sum pension?????

I think Rog2 is correct. I would assume like any other unpaid taxes owed to HMRC that these will be included in the bankruptcy and any payments towards these will not have to be made.

NT tax code.

rog2 wrote: »

What you MAY be getting the emails for is that your Tax code, for your bankruptcy period, will be changed to a 'zero' code. Any tax that would normally have been due would, then, go to the OR for distribution to your creditors.

I think it might be a bit early for the OR to be dealing with this just yet, but the jist is.

From here and here.

”NT” tax code Income Payments Agreements and Income Payment Orders

When a bankruptcy order is made against an individual who is subject to PAYE, HM Revenue and Customs (HMRC) applies a “nil tax” code to that person for the remainder of the tax year in which they were declared bankrupt and can then claim in the bankruptcy for the amount of tax which would have been collected, as long as the debtor does not change his/her source of income (i.e. gets a new job) during the tax year in which the bankruptcy order was made.

Where the new tax code is expected to be applied before the end of the tax year an IPA/IPO should be obtained. Where the bankrupt has signed the Tax and NI Disclosure Authority, an Income Payments Agreement (IPA) should be sought in preference to an Income Payments Order (IPO), to claim the extra money that the debtor receives.

An IPA/IPO can be made purely on NT tax code grounds and is not dependent on whether the debtor has any disposable income to make regular payments.

Phew......;)

I hope all of that's right, and that some of it helps.

nicpicot

we run an entertainment agency supplying speakers and topical entertainment. It is important that we know what is going on in the world. The IR inspector says we cannot claim for newspapers. Is this correct?

worried123

Nipicot - sorry that I cannot answer your question although I am sure that somebody will come along and help you....good luck.
Seems a bit mean of the OR though - surely you do need them for your work.
I just wanted to thank everybody for their help. This site has been a tremendous help to me.....Fermi thank you....I cannot get my head around what you have posted right now - it is very late - but I am extremely grateful indeed and will look inot this....although, when I mentioned to the or about my pension via e-mail - he said that it had to be paid! - but I might go directly to the inland revenue about this - after I have read and re-read the info given here....thanks all - thanks Fermi - much appreciated.

All the best

PS - can I actually approach the inland revenue about this myself of does it have to be done through my OR

fermi

worried123 wrote: »

....although, when I mentioned to the or about my pension via e-mail - he said that it had to be paid! - but I might go directly to the inland revenue about this - after I have read and re-read the info given here....

This is the sort of area where it becomes very difficult to determine what is correct. Advice given on forums such as these is just opinion based upon experience (nothing more), and so should be taken with a pinch of salt when anything is critical or disputed. I'm sure I don't really need to tell you that though.:o

However, the OR's can and do get things wrong sometimes. Although most of these mistakes are due to junior/inexperienced examiners handling your case who don't check properly with superiors. The explosion in insolvencies in the last few years means that many offices are run off their feet and under-resourced. In that sort of climate the occasional mistake is bound to happen. I'm not necessarily suggesting this is a mistake, but that not every word spoken/written/emailed by 'the OR' should be taken as gospel every time.

It will be interesting to see what the outcome of this is.