Tax arrears

Megatron1980

Hi there - I apologise if this is in the wrong place!

Basically my wife owes 42k (including about 7k in fines) to HMRC in unpaid taxes - this figure jumped considerably during covid as we were unable to support our household as I was out of work, we just fell behind with payments. The amount is in her name but it is of course a shared debt. We buried our heads in the sand for many years as the interest and fines grew and the figure just became impossible to pay as the letters just stacked up.

We finally called HMRC a couple of weeks ago to get some help and advice - we were told to write a letter. Within days we had a knock on the door, this action of contacting them seems to have activated HMRC as they are now stepping up their enquires. Basically we have no savings, a car in my wife's name and a house in mine. We just don't know what to do - we both have full time jobs and are not on huge salaries (about 45k combined) what should we do?  We are looking into the IVA route but that scares us for many reasons, but we understand if that is the only road we can take - any help would be most appreciated. Thanks.

TheSpectator

HMRC may (and probably will) object to an IVA and seek bankruptcy.

It is not a 'shared debt' if it was her business. Probably a good thing for you if the house is in your name (hopefully it has always been in your name and not something done to put the asset out of reach of the taxman)

Dazed_and_C0nfused

What is the source of income that has resulted in her doing tax in the first place?

Is she self employed, renting property or something else?

MattMattMattUK

It may be worth you completing a full SOA. You need to fully assess your ability to pay and that includes potentially liquidating assets. HMRC will not accept an IVA, they will seek to make your wife bankrupt and obtain their money from the equity in your property. 

What is the origin of the tax bill, only income tax, NI, corporation tax from an Ltd? Are the fines and interest for non-payment only or are there also fines for not filing self-assessment? Is all self-assessment up to date?

https://www.lemonfool.co.uk/financecalculators/soa.php

Grumpelstiltskin

OK OP The first thing you must realize is you can't mess around any longer. HMRC won't mess around and they will  in all probability go for bankruptcy.

So what ever you do do it NOW.

Grumpelstiltskin

Do you have any other unsecured debts? If you do stop paying them now and scape up every penny you have to pay to HMRC

ManyWays

You haven't said a lot so some of this may not be helpful:

- you may think of this morally as a household debt you are responsible for, but faced with a major debt problem and possible insolvency, you have to go by what you are each legally liable for.  This sounds as though the tax debt is all hers, correct? This is vital, if she needs a form of insolvency it is important it has as little effect on you and your house as possible.

- was she personally liable for this, it isnt some limited company she feels obliged to pay the debts for?

- Business Debtline is excellent for advice to the self-employed and those who have a small limited company and even though she is now working, they will still advise her. They know more about options for tax debts than most advice agencies. https://www.businessdebtline.org/

- an IVA is very unlikely. It has to be approved by 75% by value of the creditors voting so HMRC would effectively have a veto. And if your combined income is only 45k and you have a mortgage its unlikely you could make large monthly repayments.

- if the house has always been in your name and you provided the deposit, it is possible that bankruptcy may be a good option for her. She would lose the car if it is worth more than 4k. You two need to consider your options for another car in your name (or another family member's name)

- if she has other personal debts, an option is for her to stop paying those and pay more to HMRC. But they would have to be very large for that to be a solution. 

Megatron1980

Thank you for all the responses.

First of all it was the advice of our accountants, and the HMRC representative that visited us that suggested looking into an IVA - they didnt mention any other routes other than selling any assets we owned or remortgaging which unfortunately I couldn't do.

The house has always been in my name since we bought it 10 years ago  - but the original deposit of 20k was gifted by my wife's mother.

The HMRC debt is from self-employment and the fines and interest are for non-payment only - all self-assessment is up to date.

We do have credit card debt in both mine and wife's name of about 10k - however these are all on an interest free period for at least 2 years.

DullGreyGuy

Megatron1980 said:

First of all it was the advice of our accountants, and the HMRC representative that visited us that suggested looking into an IVA - they didnt mention any other routes other than selling any assets we owned or remortgaging which unfortunately I couldn't do.

The house has always been in my name since we bought it 10 years ago  - but the original deposit of 20k was gifted by my wife's mother.

The HMRC debt is from self-employment and the fines and interest are for non-payment only - all self-assessment is up to date.

We do have credit card debt in both mine and wife's name of about 10k - however these are all on an interest free period for at least 2 years.

That doesn't sound like a house you own exclusively. 

There are no joint debt credit cards in the UK... can't explain why, have asked for many years and no one can explain. From a basic view there is an account holder and secondary cardholders... only the former is initially liable, though other processes may view it as a joint debt. 

Megatron1980

The deposit was gifted from my wife's mother and went through my mortgage advisor - I dont know how that works to be honest I would have to pull out the paperwork.

When I say shared credit card debt, I mean some cards are in solely my wife's name - and some are just in mine. We are not financially associated in anyway I can think of - we dont even have a joint account.