Post / After bankruptcy Self Employed Sole Trader buying stock or personal vehicle Catch 22

BrokenBroke

Hello all. Checked the forums re this subject but found nothing but pre-bcy advice.

As a sole trader Motor Trader starting from nothing I have encountered these issues: how do I get stock? Yes I can get a few cheapies on consignment to make a few £'s but I still have expenses and to live so how then if I make a good profit can I buy a vehicle (either for personl use or a work van/recovery truck "tool") for myself/business (this also applies to non self employed)? Becuse according to the Admins if I make excess income (then classed a ssavings) I have to pay a contribution - but if I pay that (even if only a 1-time deal they will fix contribution for 6 months-every month) how do I have anything left to buy a vehicle??? Seems like total catch 22 like the old "you need a job to get a job" - in this case to get a job you need transport but you cant afford to save for transport because you have to make a contribution!!! And obviously I cannot finance or even hire a vehicle (not cost effective) so have to buy for cash - which with a budget of £2-3000 I am not getting much if anything these days.......

Same question for stock (regardless of the commodity if you are in sales/repairs/services etc etc)- if I make a profit it's classed as INCOME then reclassed as a contribution (even if it's 1-off) therby reducing/wiping out your ability to purchase stock and grow your business. So what is the answer?

BrokenBroke

Anyone????

Minkym00

It’s not necessary to tell the OR if you are receiving cash payments in the course of trading, that is to be expected as presumably you will be reinvesting the funds. They don’t check your bank constantly and with self employed people may just ask you to provide three line accounts at some point before discharge (i.e. income, expenses, profit). 

You can only be asked to agree an income payments agreement whilst still bankrupt, how long is it until you are discharged?

With bankruptcy on your record financing your business is going to be a problem, there’s just no answer to that really.

MalMonroe

Hi, 

The problem with a business such as the one you describe is that you first of all will need quite a bit of capital in order to get stock. And it needs to be continuously successful in order for you to make a profit.

As Minkym00 says, above, that will be difficult post-bankruptcy. Especially as you are a sole trader Motor Trader starting from nothing. Not only starting from nothing but also no way to get anything decent to start with. Motors aren't cheap, as we all know.

In your position I would definitely contact one of the free debt help agencies, such as StepChange, Some info in the following link -

https://www.stepchange.org/debt-info/bankruptcy-and-my-business.aspx

In the next link is some info on how to set up a business - https://www.gov.uk/set-up-business

I also think the information in the next link is very helpful in respect of planning, etc  - 

https://www.moneyhelper.org.uk/en/work/self-employment/thinking-of-starting-up-in-business

I have had a DRO in the past and struggled financially for a good few years but I am now retired and also self-employed but because I supply services rather than goods, it didn't cost me much to set up and I registered with HMRC and am able to work online from home. Of course, a pension does provide a helpful cushion for me now too.

Motor trading, I would imagine, is extremely competitive as well as being expensive to set up.

But if you have a word with StepChange - or National Debtline, or someone at Citizens Advice, they will be able to give you further information and advice. 

All the best for the future. 

StepChange_Aidan

MalMonroe said:

Hi, 

The problem with a business such as the one you describe is that you first of all will need quite a bit of capital in order to get stock. And it needs to be continuously successful in order for you to make a profit.

As Minkym00 says, above, that will be difficult post-bankruptcy. Especially as you are a sole trader Motor Trader starting from nothing. Not only starting from nothing but also no way to get anything decent to start with. Motors aren't cheap, as we all know.

In your position I would definitely contact one of the free debt help agencies, such as StepChange, Some info in the following link -

https://www.stepchange.org/debt-info/bankruptcy-and-my-business.aspx

In the next link is some info on how to set up a business - https://www.gov.uk/set-up-business

I also think the information in the next link is very helpful in respect of planning, etc  - 

https://www.moneyhelper.org.uk/en/work/self-employment/thinking-of-starting-up-in-business

I have had a DRO in the past and struggled financially for a good few years but I am now retired and also self-employed but because I supply services rather than goods, it didn't cost me much to set up and I registered with HMRC and am able to work online from home. Of course, a pension does provide a helpful cushion for me now too.

Motor trading, I would imagine, is extremely competitive as well as being expensive to set up.

But if you have a word with StepChange - or National Debtline, or someone at Citizens Advice, they will be able to give you further information and advice. 

All the best for the future. 

Hi,

Just to confirm, StepChange are unable to give advice to people who are self-employed. In the OP’s situation I’d recommend that they contact Business Debtline for specialist help.

https://www.businessdebtline.org/

Regards,

Aidan

BrokenBroke

Thanks for reply. I am 18months in (6 months after discharge) from bkcy start date. You say 3 line accounts. Not possible - He (Admin) wants me to prep accounts p&l every 6 months to show profit/loss upon which He will decide if contribution is reqd. 2 issues there 1) the accounts to Him will not match accounts to HMRC as they are totally different dates 2) if I decalre a profit they want to use that as a basis for next 6 months contribution if this has not been "used" by the end of that 6 month period - as I stated above - in this (and many others also) business we make 1 large and 6 small deals - never ever consisdent so income is never guaranteed). So why work to make a profit when it's going to be taxed by Admin?

If I only deal in cash - not really poss these days as many folks want to pay bank transfer - them I would need to "hide" profits but then use them to purchase stock - at some point someone is going to ask where that came from - and no I am not naive to what you suggest. And of course after every 6 month submission I have to make an allowance for HMRC/taxes.

So decare a profit (which is not a wage or income!) and then have to make a contribuiton or "hide" and cash from Him so I can buy stock but that leaves a sticky wicket of having to show at HMRC with the risk of Him finding out which he then takes as literally "hiding" income - which is even more difficult by purchasing good/spares etc thus increasing purchases but not income.....am I really missing something obvious here? I should be a ble to increase stock without it being decalred as income in some way...I cannot even raise the funds to buy a works vehicle otherwise.

BrokenBroke

No one up for this?

silvercar

I would guess that some of your so called profit isn't profit but retained cash to purchase stock. Call it 'purchasing fund', 'trading balance' rather than profit.

BrokenBroke

Thanks for reply silvercar. I assume it's ok to have either of those 2 line items in balance sheet? My question then would be - can it/balance/fund be carried over to next fin year without paying tax on it or?

silvercar

BrokenBroke said:

Thanks for reply silvercar. I assume it's ok to have either of those 2 line items in balance sheet? My question then would be - can it/balance/fund be carried over to next fin year without paying tax on it or?

Sorry, I really don't know how hmrc would see it. I assume there must be some mechanism or motor traders couldn't operate as self employed. Maybe post on the cutting tax board?

flipflopflo

Do you have an IPA at the moment?