Overdue HMRC debt (to say the least) - bankruptcy threatened

SeduLOUs

dipshit123456 wrote: »

Do I need to worry about bankrupty affecting my fiancee in any way? Will it affect HER credit rating? Can they take any of HER funds/assets? We've been living together 18 months (officially 8 months) if that makes any difference.

Living together (or even being married) isn't a problem for her credit rating, being financially linked is.

Do you have any joint bank accounts, savings, mortgage etc?

poppasmurf_bewdley

I've read all the above opinions.

Bankruptcy for you is really the only viable option. You may lose your car, but it doesn't sound as though that will be too much of a problem.

And you will be free of HMRC and ALL your other debits, and free to start living properly again in probably 12 months time.

It's a no brainer.

poppasmurf_bewdley

dipshit123456 wrote: »

What happens if I magically earn £50k three months after the bankruptcy is filed?

Then it will go towards paying your creditors. Any windfall you get will do so until you are discharged from bankruptcy, which is usually 12 months after you have been declared bankrupt.

So don't do the lottery until you are discharged!

sourcrates

dipshit123456 wrote: »

What happens if I magically earn £50k three months after the bankruptcy is filed?

Your trustee will tell you if you have to make monthly payments from your spare income - you’ll only have to do this if you can afford it.
The arrangement can last for up to 3 years and is called an Income Payments Agreement (IPA).



The actual amount depends on how much you can afford after essential expenses like food and bills are paid.


Its the restrictions which may impact more on you :


You have to follow bankruptcy restrictions when you’re bankrupt. This means you can’t:

• borrow more than £500 without telling the lender you’re bankrupt
• act as a director of a company without the court’s permission
• create, manage or promote a company without the court’s permission
• manage a business with a different name without telling people you do business with that you’re bankrupt

Jimbo8012

I wonder what happened in this case and whether the OP managed to come to an arrangement or had to declare bankruptcy? If it was the latter, I suspect if he'd have also been subject to an additional Bankruptcy Restriction Undertaking (BRU) or even a Bankruptcy Restriction Order (BRO) from the Official Receiver. It's one thing running up debts but running up tax debts from self-employment with no ability to pay whatsoever is definitely inadvisable.

It seems HMRC were pretty lenient with the OP tbh and I'm not sure we got the whole story. Looking at the facts, it's almost certain that he was caught by HMRC rather than he made a voluntary disclosure of his own volition. If he had made a voluntary disclosure through an accountant, he'd have very likely avoided late filing penalties and even late payment penalties. Paying the bill and interest upfront would have probably satisfied HMRC especially considering he had zero assets. The bill could have been much lower.

12 months to pay back the debt also seems very generous from HMRC considering that he had seemingly ignored all their communication for at least several months and possibly much longer. In reality, this had probably been going on for at least 6 months for HMRC to threaten bankruptcy proceedings.

I suspect HMRC had an ulterior motive here and knew that he had no assets to realise in bankruptcy hence the 12 month Time to Pay plan. Having no assets to realise but a steady, decent income is the best place to be in a situation like this. Very likely saves a lot of people from being declared bankrupt by creditors such as HMRC.

EssexHebridean

I doubt we'll ever know to be honest.

It does serve as a warning to all those self employed folk out there though - DO your returns - and submit them on time. You get NINE months to complete them - and contrary to what a lot of people seem to think there is NO need to wait for the last minute. You know what - the HMRC self-=assessment site is open right now for your return to be submitted so get cracking on it now - don't leave it until January when things aren't as fresh in your mind!

Here's another one for you - as a sole trader with a single income stream your return is simple - really simple. It doesn't need to take weeks, and definitely not months,. Set aside a day, sit down and do it!

And finally - tax - take the appropriate percentage of EVERYTHING you earn straight off the top when invoices get paid, and stash that away in a tax clearly (for the avoidance of doubt!) labelled "Tax money!" - then, guess what, when the demand comes along, the money is sat there - almost certainly with a bit extra on top as a nice "well done" bonus for you. No brainer? You'd have thought so, wouldn't you!

Jimbo8012

@EssexHebridean - There's a lot of good advice there. :-) What I would add however is that whilst self-assessment is fairly self-explanatory, a good accountant should always be used to formulate accounts (even by a sole trader) because they can take thousands off taxable income. Looking at the OP's circumstances and his job in IT, I bet an accountant could have claimed internet/broadband in its entirety, a large percentage of his rent (using home as a business etc), rates and even estimated fuel for his car. The accountancy fees would be tax deductible and overall a good accountant could have likely knocked £1,000-£1,500 off his tax bill each year so he was paying hardly anything at all. Another advantage of using an accountant is your far less likely to be queried.

I can understand why people can get behind on their tax. Running a business is hard and it's a real struggle in the first 2-3 years. Most don't make much if any profit in this period and consequently I can understand the temptation to not self-assess. However, some panic after this time and instead of coming forward bury their head in the sand even further.

Of course, tax evasion is morally wrong and illegal but if someone comes forward at least they're trying to do the right thing and that should be recognised.

I'd have a lot more sympathy for the OP if he'd come forward of his own volition, had already paid off a fair proportion of the tax due (say £10,000) and was looking to pay off the balance on a payment plan. At least he'd been cooperative with HMRC. Instead it seemed like he was trying to get out of paying what was owed. If I was his Official Receiver, I'd have almost certainly made him sign a Bankruptcy Restriction Undertaking especially as he had debts to other parties in addition to HMRC.

There's burying your head in the sand but you've come to your senses and tried to do the right thing. Then there's just taking the p**s and running up debts with no reasonable ability to pay them in any way whatsoever.

pelirocco

sourcrates wrote: »

Hi,

Making you bankrupt would serve no purpose as you have no assets to speak of, so that's a bit of a non threat in all honesty.

Best advice is get your returns sorted out, as they have asked you to do, then try and negotiate a better repayment plan, do it in writing, as you bypass the call centre staff, and have evidence of what's been offered/agreed.

I hate to be the bearer of bad news , but HMRC dont give a toss if there are any assetts , they issue bankruptcy orders , and company winding up orders like confetti . This is a real threat and the OP needs proper advice


I should read the whole thread before commenting , didnt realise this was an old thread , and i had already posted on it at the time !!!

Jimbo8012

@pelirocco - I agree that at this stage bankruptcy's a very real threat. However, HMRC only make people bankrupt as a very last resort. Looking at the information, I think this had gone on for at least 6 months but possibly a lot longer and I don't think the OP's conduct was particularly good either. He definitely seemed like the type who wanted to wiggle out of paying what was owed.

Considering the circumstances described by the OP, I thought that HMRC were extremely lenient. Despite HMRC obviously catching up with him and sending countless Notices to Complete Tax Returns, penalty notices etc, they were happy for zero payment up front and a 12 month payment plan. This shows that whilst they were prepared to start bankruptcy proceedings due to his conduct, they knew that there were zero assets to realise in Bankruptcy and thus give him one more chance despite his previous, questionable conduct.

As I've said before, having no assets to realise but a steady, decent income is the best place to be in a situation like this.