IPA and zero rated for tax

vivki

Hi

If I had a deficit of £10 per my I and E, would the OR look to set up an IPA based on any extra pay I receive due to not having to pay tax until the end of the next tax year? I hope that makes sense?

Thanks

ToxtethO'Grady

They can set up an IPA using the surplus created by your nil tax code until the start of the next tax year then your IPA would be reviewed as at the start of the new tax year your tax would be paid.


So you'd probably have an IPA set and it would be changed to a nil arrangement for the remainder of your IPA once your tax returns to normal.

Sorry I've just seen your SOA so it would be as I've said above

vivki

Oh darn! It only occurred to me tonight. My husband has a deficit but even if that deficit was agreed by the OR, he’d be tied in for 3 years because of the tax! I thought he would have a chance of a clean break after 12 months but it’s looking less likely now!

Clouds88

Sorry that other advise is wrong. A tax payment set up is different from a surplus IPA. If you are only paying your tax to Clarke and willmot or whoever they chose you’ll still be discharged at 12 months with no IPA as long as your income/outgoings stay the same

TheGardener

vivki wrote: »

Oh darn! It only occurred to me tonight. My husband has a deficit but even if that deficit was agreed by the OR, he’d be tied in for 3 years because of the tax! I thought he would have a chance of a clean break after 12 months but it’s looking less likely now!

The Nil Tax IPA only runs until the end of the financial year of your BR or until you start work with a new employer - whichever comes first. A separate surplus income IPA has to be set before you are discharged - if there is still a deficit or no surplus income then the OR can't set up an IPA. Having a NT IPA is not the same as a surplus income IPA.

vivki

Wow thanks guys. That certainly gives me some hope!

ToxtethO'Grady

6.2 Suspended income tax paymentsHMRC will apply a ‘nil tax code’ (NT) when you’re bankrupt. This tells your employer not to take any further income tax from your wages for the rest of the tax year (ending on 5 April). The extra money in your pay that results from this can be claimed by the trustee to form part or all of an IPA or IPO. If the IPA or IPO is wholly paid out of this extra income, it will stop when you start paying tax again.