HMRC & Bankruptcy

Bob_Bob

Hello,

I would very much appreciate any advice that could be given regarding a situation between myself and HMRC.

HRMC are threatening bankruptcy for unpaid Income Tax. They are asking that the full amount, approximately £10,000 be paid before the beginning of January or else they will proceed with a bankruptcy petition.

The larger part of the debt is from around 2010/11 when I was earning significantly more than I have since. I earn approximately £1500 per month at present. During 2015/16 I had a serious illness, and my repayment plan stopped. I haven’t contacted HMRC since, and they have only now contacted me about this.

I have offered repayments of £200 per month, but HMRC have refused this due to the length of time it will take to settle the debt. After reviewing my finances, it may be possible to increase this to £400 per month, but will it be likely that HMRC will accept this?

In the refusal letter, HMRC provided the following link :

.gov .uk/ options-for-paying-off-your-debts

And suggested that I may wish to take out a loan to pay off the debt.

I would not be able to take out a loan.

If HMRC will not accept £400 per month then it would seem I can do nothing to prevent them proceeding.

I have no assets. I do not own a house, or a car, nor do I have any significant material possessions. I have no saving. I live in rented accommodation, and all major appliances are provided.

I am a sole-trader and run an internet business. My monthly income is the only money I have. I understand that if I am declared bankrupt I will lose my bank accounts, but will be able to open a new one afterwards. If this is correct then this would seem to be the only real inconvenience?

I very much want to pay this debt, but I cannot offer money I don’t have. As I have no assets then I understand that the debt will not be paid, and after 12 months will be written off. Is this correct?

Why would HMRC prefer this situation rather than have £4800 of the debt paid of in 12 months?

Is there anyway I can prove to HMRC that I have no assets and that bankruptcy would not be in their, or the tax payers’, interest? It seems that HMRC would have nothing to lose by giving me a final chance make monthly payments?

This situation is entirely my fault.

Any advice would be much appreciated.

noobinvestor

HMRC are very aggressive.


You will need to pay back the debt within 12 months or they will make you bankrupt.

Brock_and_Roll

At the end of the day, if you don't have it they cant take it!

BoGoF

You won't have paid £4800 of the current balance in 12 months though will you.....not with interest being continually added. Interest on an almost 10 year old £10k debt is going to be substantial and continuing to accrue.

Bob_Bob

Interest, per day, is 75 pence.

So, £273 per year, not a substantial decrease of the £4800.

JCS1

HMRC also use bankruptcy as a way to close their files.

pramsay13

Your biggest mistake was stopping the payment plan and hoping they would forget about it.

Repaying over 2+ years is too long for HMRC.

Can you increase to repay with 1 year?

If you increase it and make a payment just now before you even approach them then HMRC will know you are serious about repaying.

Bob_Bob

£400 a month will be the maximum I could afford. I cannot make any other payments.

If bankruptcy is inevitable then, what effect will it have, baring in mind my circumstances described above?

Will I be able to open a basic bank account with a debit card, or keep one that I have my wages paid into?

Bluecar2

Hi, I was in a similar sitution to yourself with HMRC, they will make you bankrupt regardless of whether or not you have assets, It will take a very long time i think it was about 2 years from the threat of bankruptcy to the day it happened but most of that was there complete inability to do anything correctly, given my chance again i would have beaten them to it and made myself bankrupt so i was in control of it and save a lot of stress, now it has happened it is the best thing that has happend and is such a relief that it is all done and finished with (8 months to discharge)

Bob_Bob

Thanks for responding Bluecar.

Were you able to keep one of your bank accounts, or open a new one somewhere?

sourcrates

Bob_Bob wrote: »

Thanks for responding Bluecar.

Were you able to keep one of your bank accounts, or open a new one somewhere?

Your bank accounts are frozen by the OR, so you need to apply for a basic bank account, as soon as possible afterwards, you will need cash for day to day living expences during this time, make sure you are prepared for this, empty the account beforehand.

Other than the fact credit will not be available to you, bankrupcy has very little effect on your everyday life to be honest, as long as your work is not affected by it, its buisness as usual for most people.

You will be asked to provide a budget, certain allowences will apply to this, if you have anything over £20 disposable income left at month end, you will get an IPA (income payment arrangement) just make sure you cooperate fully with the OR, to avoid further, and lengthy, bankrupcy restrictions, after 12 months you are usually discharged, the IPA can last up to 3 years.

Bankrupcy costs £680, so i`d rather they pay that than me, it should be viwed as a new begining, rather than an end to life as you know it, most people say its the best thing thats ever happened to them.