Tax issue/bankruptcy

[dannster]

Hi all,

Just looking for a bit of advice about a tax issue...

I was self employed for six years and didn't get round to declaring tax for four years (I was a student in this time and didn't fully realise how much I owed).

My tax bill for those four years and a VAT bill came to about £100,000. I stopped my business before this all came about so I didn't have the money set aside to pay anything or even come to an agreement of paying it off over time. HMRC were very understanding but said inevitably if I couldn't pay it then they'll have to take action.

It's been about a year when they said they'd take action and I've basically ignored it, knowing it was inevitable and there wasn't anything I could do about it.

In this past year I've moved and started a 9-5 and I'm very happy. Unfortunately, this week they tried to serve me a bankruptcy petition to my old address (where my ex lives), and they're going to try again on the 31st.

I don't have any assets. I rent and have no savings. There'd be nothing that they can recover to pay off this debt. In a way, I think bankruptcy would be beneficial for this reason.

My question is basically what should I do? Should I contact citizens advice? Would I be able to remain in my job? What would happen with paying PAYE tax and national insurance?

 

[Method Man]

It depends Sir on what kind of job you have. If you are in a position of trust then you may not be able to carry on in your current role as it is at the moment.

Generally speaking, if a Bankruptcy Order is made against you then you won't be able to act as a Director of a company until you are discharged.

If you are a member of a professional body (e.g. Institute of Chartered Accountants) then that body may (or more likley, will) have its own restrictions/penalties which it can impose on you whilst you are bankrupt.

If you are paid by your current employer through the PAYE scheme then this will not be affected by the Bankruptcy.

Feel free to ask any other questions on this.

 

[Spongebob]

From what you've told us bankruptcy would be by far the best option for you. It is unlikely that your employer or landlord will ever know about it unless you choose to tell them, and why would you do that?

I would suggest that you visit the bankruptcy forum at www.moneysavingexpert.co.uk for excellent advice on the process and how to avoid an Income Payments Order.

About the only thing you've got to lose is your credit rating, but if you're £100k better off why would you need to borrow money?

 

[davek17]

have I missed something here. You have a tax and VAT bill of £100K over 4 years and you're pleading innocence on this?

You're not the CEO of a bank are you? ;-)

 

[Alan R Price]

My question is basically what should I do? Should I contact citizens advice? Would I be able to remain in my job? What would happen with paying PAYE tax and national insurance?

I think Spongebob is probably right.

Have a look at the official receiver's website and this publication in particular: http://www.bis.gov.uk/assets/bispartners/insolvency/docs/publication-pdfs/guidetobankruptcy.pdf.

 

[dannster]

Thanks guys, it really helps.

I have another question, specifically about my income from my current job. Would the trustee take any of my income away from me? Say, for example, I'm earning £1300 after tax. Would they deduct any of my salary?

 

[Charlie B ACS]

They will look at your excess income, after essential bills, not just your base salary.

 

[Method Man]

Thanks guys, it really helps.

I have another question, specifically about my income from my current job. Would the trustee take any of my income away from me? Say, for example, I'm earning £1300 after tax. Would they deduct any of my salary?

The link in SpongeBob's post ought to allay your concerns and give you some guidance on this.

 

[Jess2801]

Your options may be either of the following 1, an IVA or individual voluntary arrangement which a financial adviser should be able to arrange for you.2, a debt management plan. Either of these will require you to be employed or in work i believe and you will be expected to pay possibly £100 - £200 per month. I am not a financial adviser and can only tell you based on my own experiences but if you cannot follow either of these then your last option would be bankruptcy which would be an expensive route should you have to pay for this yourself, around £600 I think. Im not sure how it applies when it comes to income tax but an FA would be able to tell you

 

[Jess2801]

If you mean the 'Official Reciever' then possibly. They will look into everything including how you have managed your finances and your personal accounts, what expenses you have and what luxuries you have, they will even aks you if you have sky. You have to provide your official reviever with all the help, information and support you can, in which case you could be discharged from bankruptcy proceedings after just 8 months but still be registered as bankrupt for the full 12. You will not be permitted to run a limited company or apply for credit whilst registered bankrupt unless you make any creditor aware of your bankruptcy status. Once their investigations are complete they could ask you to pay an amount deemed affordable to you to pay each month.