Can HMRC force sale of house

swindiff

I have a friend who has got himself into a bit of a pickle. He has a huge tax liability which he has no way of paying and the only way he sees of moving forward is by going bankrupt.
He owns a house with a mortgage jointly with his wife with about 35k of equity. However he does not live in the property he rents it out and then rents another property for his family to live in.
So the question is as he owns the house jointly with his wife and he is the only one liable for the tax bill can HMRC force the sale to try and recover some of the debt?

Cobalt77

Depending on the amount of the tax liability, HMRC will usually go to the County Court first for a CCJ. Once the CCJ has been granted, they can then place a second charge on the property (thus securing their debt to make sure it gets paid)

HTH

antrobus

swindiff wrote: »

...So the question is as he owns the house jointly with his wife and he is the only one liable for the tax bill can HMRC force the sale to try and recover some of the debt?

I don't think so, because it's in joint ownership. They can place a restriction against your friend's share, but that's not the same thing

See this thread

https://forums.moneysavingexpert.com/discussion/1839539

swindiff

Thanks I thought that might be the case. The liability is likely to be around £50k

jamesd

swindiff wrote: »

He owns a house with a mortgage jointly with his wife with about 35k of equity. However he does not live in the property he rents it out and then rents another property for his family to live in.

The joint ownership is critical information. The Official Receiver will not attempt to sell a whole jointly owned property but will place a restriction. Been there as a tenant on such a property.

The tenant will be notified by the OR of the actions and the OR will answer questions about things that are public knowledge if the tenant phones them and asks. I did. For more details the court that does the bankruptcy deed can be contacted and since it's a public record they will provide more detail of the case.

The Land Registry offers a service that wil notify people by email if there is a change in the record for a number of properties. A prudent tenant may want to register their own home for this. I did and received the relevant notices. A person who wants to buy in the area might also register for notices so they can be informed of potential new buying opportunities.

Better for the landlord to tell the tenant first and reassure them that this does not mean that their tenancy is going to end or be taken over by the OR.

However, while the OR won't sell the whole property, if the value of the bankrupt's interest in the property is sufficient, the OR can try to sell that. The 35k of equity here does seem sufficient, so be aware of the possibility of a forced sale of the BR's interest and the potential future complexities of having a new part owner who isn't a family member, but who may want to live in or sell their property and would be entitled to both a share of rent and bills. As a joint owner they can seek an order from a court compelling sale and may succeed. A tenant might, say, discuss value with the OR and make an offer to buy the interest that the OR would accept as being in the interests of the creditors.

swindiff

Thanks. The Tennant in question is a family member so is aware of the situatuon. I am wondering if my friend would be better off moving back into their own property. It is smaller than the place they are living in which was the original reason for moving out and letting their family home (they wanted more space). But would the property they own be "safer" if they were living in it?

coolcait

If your friend lives in Scotland, the answers on this thread won't apply to his situation.

Cobalt77

swindiff wrote: »

Thanks. The Tennant in question is a family member so is aware of the situatuon. I am wondering if my friend would be better off moving back into their own property. It is smaller than the place they are living in which was the original reason for moving out and letting their family home (they wanted more space). But would the property they own be "safer" if they were living in it?

Nope. If your BR friend has ANY material assets (aside from a £1K car) anywhere in the world, the OR will take them - end of story. There is absolutely NO debate on this one, as it's the law.

Also, advise your friend he will very likely get a BRO/BRU which will extend his bankruptcy obligations beyond the normal 12 months. This is very common when you go BR owing HMRC a lot of money.

HTH

swindiff

Cheers Cobalt77 very helpful.

swindiff

One more thing. Would the charging order be for the full amount of the debt or would it be half of what the equity currently is. So if there is 35k equity my friends share would be 17.5k. Would they put a charging order for the full amount he owes on the property assuming that any future increase in property value could also be used against his liability.

Flyright

Also, if he is made bankrupt with the house being rented out, the OR will likely take half the monthly rent as an asset in the bankruptcy.