Insolvency can I lose my home

[Olu Olu]

Hi

I am going through a liquidation of my company, I have an overdrawn directors account to HMRC of cica 100k.

I made an offer of 10 full and final payment or 500 quid a month for 4 years. The offer was rejected adn they said I should raise my full and final payment, in the rejection later they made refernce to the fact that I own a property albeit wife and I own it, and i valued it at circa 780k with outstanding mortgage of 580k.

They also made refence that i should make an offer than is higher than what they would make if they came after me with alternative means etc I was wondering in terms of a revised offer I was thinking 15k although I have been advised on here that since I have offered 24k via monthly payments they probably won't accept 15k, maybe I can offer two payments of 12k one year apart what do you think?

I also noticed the insolvency company don't seem as friendly as they were when I signed up with them

Wife is worried that we may be forced to sell house

Thank you

 

[Mr D]

Overdrawn directors loan is to the company. Does the business owe HMRC £100k or you owe the business £100k? If the latter, what does the business owe?

 

[Olu Olu]

Overdrawn directors loan is to the company. Does the business owe HMRC £100k or you owe the business £100k? If the latter, what does the business owe?

The debt to HMRC is circa 90k and the overdrawn is about 100k because its a one man business IT consultancy working as a contractor.

No staff no assets etc, I was owing HMRC over the years a total of about 95k (combination of VAT and Corp tax) and when all my books were done the overdrawn is about 100k

Hope that makes sense

 

[UK Contractor Accountant]

They will probably insist on a Charging Order on the property anyway if you do not come up with a realistic offer.

You will also need to consider your personal tax position - any loan write off will need to be treated as income and declared on your Tax Return.

I think liquidators now have tell HMRC if they formally write of part of the loan as non collectable.

 

[Olu Olu]

They will probably insist on a Charging Order on the property anyway if you do not come up with a realistic offer.

You will also need to consider your personal tax position - any loan write off will need to be treated as income and declared on your Tax Return.

I think liquidators now have tell HMRC if they formally write of part of the loan as non collectable.

What do you think will be a reasonable offer, does anyone know circa how much HMRC or the liquidator will consider a reasonable offer, 25%, 40%, 50% etc or they want full payment over several years

 

[UK Contractor Accountant]

There is no point making an offer you cant afford.

Have they asked for a forecast cash flow statement showing your incomings & outgoings for the next 2 years?

The ones i have seen negotiated normally start off with an agreed monthly amount based on a realistic cash flow statement which is then reviewed and varied at the end of each year.

Alternatively offer a lump sum settelment around the 30-40% mark. Thats if you can raise the funds.

 

[Mr D]

The debt to HMRC is circa 90k and the overdrawn is about 100k because its a one man business IT consultancy working as a contractor.

No staff no assets etc, I was owing HMRC over the years a total of about 95k (combination of VAT and Corp tax) and when all my books were done the overdrawn is about 100k

Hope that makes sense

So HMRC are after at least £90k from the company - no idea if they would accept less but £24k appears not to be workable for them.

The directors loan account is untaxed income as UK Contractor says, affecting your personal taxation for what you have had that isn't going to be paid back.

 

[Olu Olu]

There is no point making an offer you cant afford.

Have they asked for a forecast cash flow statement showing your incomings & outgoings for the next 2 years?

The ones i have seen negotiated normally start off with an agreed monthly amount based on a realistic cash flow statement which is then reviewed and varied at the end of each year.

Alternatively offer a lump sum settelment around the 30-40% mark. Thats if you can raise the funds.

Yes they have my income and outgoings and are aware i work as a contractor so am not in permanent employment, maybe I should extend the 500 quid a month over 5 years, as thats 30k or I can offer that and say its subject to review every year

Raising 30 - 40k as a one lump payment is quite difficult right now, I was thinking maybe i pay a lump sum of 12k and offer 12k in 6 or 9 months time, a bit confused as dont want to lose home

 

[UK Contractor Accountant]

What did they the liquidators say about your DLA when you discussed appointing them?

You should have formally agreed to an acceptable repayment plan before signing up! The liquidators on this forum advise that.

 

[Mr D]

Yes they have my income and outgoings and are aware i work as a contractor so am not in permanent employment, maybe I should extend the 500 quid a month over 5 years, as thats 30k or I can offer that and say its subject to review every year

Raising 30 - 40k as a one lump payment is quite difficult right now, I was thinking maybe i pay a lump sum of 12k and offer 12k in 6 or 9 months time, a bit confused as dont want to lose home

Your equity in the home is what?

 

[Olu Olu]

What did they the liquidators say about your DLA when you discussed appointing them?

You should have formally agreed to an acceptable repayment plan before signing up! The liquidators on this forum advise that.

What did they the liquidators say about your DLA when you discussed appointing them?

You should have formally agreed to an acceptable repayment plan before signing up! The liquidators on this forum advise that.

Seems I made a mistake then, they dont even seem as friendly now or cooperative, i asked them what would be a reasonble amount and they didnt say anything, I have till friday to make an offer and someone here advised that i speak to an insolvency lawyer to help me with the negotiation but if the ocst of that is high, then there is almost no point

 

[Olu Olu]

Your equity in the home is what?

I would say the value of the house is 750k and outstanding mortgage is 580k but its a joint ownership with my wife so my equity is circa 85k subject to a proper valuation

 

[tony84]

Just out of curiosity, why would they accept an offer of 25% of the debt when it is clear they could get 90% of it by forcing you to sell the house or applying a charge to the property?

Speaking from a personal perspective, I would be a little insulted at anything below 50% as a starting point - but I suppose HMRC are not looking at it from a personal perspective.

 

[Olu Olu]

Just out of curiosity, why would they accept an offer of 25% of the debt when it is clear they could get 90% of it by forcing you to sell the house or applying a charge to the property?

Speaking from a personal perspective, I would be a little insulted at anything below 50% as a starting point - but I suppose HMRC are not looking at it from a personal perspective.

I am thinking they would rather settle as soon as instead of letting it go on for a long time. Also the selling cost of house might be less than valudation so the equity is subject to a lot of variables

Does anyone have any experience in these matters

 

[AllUpHere]

You've basically stolen the tax money out of the company, and now are trying not to pay it to Hmrc. I can't imagine they are going to have much sympathy with your situation. I can't imagine why you wouldn't be forced to sell the house.

 

[Olu Olu]

You've basically stolen the tax money out of the company, and now are trying not to pay it to Hmrc. I can't imagine they are going to have much sympathy with your situation. I can't imagine why you wouldn't be forced to sell the house.

Am in deep shit then, but if the focus is on getting the money then selling the house might not be the best route to get get the most value as no guarantee house will sell at that value and will sell quickly

 

[AllUpHere]

Am in deep **** then, but if the focus is on getting the money then selling the house might not be the best route to get get the most value as no guarantee house will sell at that value and will sell quickly

Even if it gets them 50 grand, it's more than you are going to give them any time soon. It seems like a no brainer to me.

 

[Olu Olu]

Even if it gets them 50 grand, it's more than you are going to give them any time soon. It seems like a no brainer to me.

And if the house doesn't sell and I am repaying during that period won't that make more sense

 

[AllUpHere]

And if the house doesn't sell and I am repaying during that period won't that make more sense

Surely they can make you do both. They could put a charge on the house quickly to secure their interest in it anyway.
You are probably better off waiting until an insolvency practitioner sees the thread. I'm just looking at it from a common sense perspective.

 

[Mark T Jones]

It’s highly unlikely you will be forced to sell your house, they could however go for anjudgement, which would look pretty bad on your credit history

I’d say your safest option is to beg, steal or borrow enough to offer a lump SUM (as indicated up to 40%) as full and final

Failing that, a lesser lump followed by an aggressive but achievable payment plan.

Ultimately HMRC know that the courts will support a payment plan and they mostly aren’t vindictive

 

[Olu Olu]

It’s highly unlikely you will be forced to sell your house, they could however go for anjudgement, which would look pretty bad on your credit history

I’d say your safest option is to beg, steal or borrow enough to offer a lump SUM (as indicated up to 40%) as full and final

Failing that, a lesser lump followed by an aggressive but achievable payment plan.

Ultimately HMRC know that the courts will support a payment plan and they mostly aren’t vindictive

Thanks in your experience what kind of time time frame would they accept, I am thinking of 500 a month for a year then 1000 a month for another year and lump sum of 12k at some time making a total of 30k

 

[Olu Olu]

It’s highly unlikely you will be forced to sell your house, they could however go for anjudgement, which would look pretty bad on your credit history

I’d say your safest option is to beg, steal or borrow enough to offer a lump SUM (as indicated up to 40%) as full and final

Failing that, a lesser lump followed by an aggressive but achievable payment plan.

Ultimately HMRC know that the courts will support a payment plan and they mostly aren’t vindictive

Would you advise getting someone to negotiate on my behalf like another insolvency practitioner or lawyer

 

[Mark T Jones]

Thanks in your experience what kind of time time frame would they accept, I am thinking of 500 a month for a year then 1000 a month for another year and lump sum of 12k at some time making a total of 30k

I’m pretty sure your options will be a discounted full and final now or full balance on the drip.

The ‘appropriate’ offer will depend on your outgoings. It should be aggressive but achievable

 

[Olu Olu]

I’m pretty sure your options will be a discounted full and final now or full balance on the drip.

The ‘appropriate’ offer will depend on your outgoings. It should be aggressive but achievable

500 on the drip would take me almost 15 years to pay if off, would much prefer the full and final just need to know how much of a discount they will agree to

 

[Mr D]

I am thinking they would rather settle as soon as instead of letting it go on for a long time. Also the selling cost of house might be less than valudation so the equity is subject to a lot of variables

Does anyone have any experience in these matters

If the selling price is less than valuation they still get a major chunk of money. Cannot see a particular downside for them, any shortfall would still be owed.

Whether they think its cost effective to sell at this point …?

 

[mattk]

500 on the drip would take me almost 15 years to pay if off, would much prefer the full and final just need to know how much of a discount they will agree to

Why are you only offering £500 a month. If you've racked up £90k in VAT and CT you must be bringing in circa £10k a month?

 

[Mr D]

Why are you only offering £500 a month. If you've racked up £90k in VAT and CT you must be bringing in circa £10k a month?

I'd guessed somewhere around £400k.

 

[tony84]

You say it may not get the asking price, but even if it sold for £100k less than you have suggested, they would end up with around £50k which is double what you are offering up at the minute.

I am not having a dig as such, I am just looking at it as if it it were my money. If you made me an offer of 25% I would have 2 words for you, with the second being off, which is basically what HMRC have said to you.

 

[OMGVape]

£500 a month is about £100k mortgage, why don’t you remortgage your house to pay your debts ?

 

[UKSBD]

If you don't pay back the directors loan you could end up with a £50k+ personal tax bill on top of what the company owes.

At least if you pay back the directors loan you won't have a personal tax bill

 

[Lisa Thomas]

The Liquidators can, and likely will move to sell your home, if you don't make offer that is acceptable to them.

You really should get an Insolvency Solicitor to negotiate with them for you.

Do you agree with the DLA balance they say you owe?

Have you obtained a current valuaiton and mortgage redemption statement to establish the accurate equity in your property? The redemption statement will include termination penalties and interest so will help to reduce your equitable interest figure.

Is your wife (or any other third parties) in a position to make a lump sum offer/purchase your interest in the property?

If I was Lqr I would probably accept a lump sum together with payments in installments over 1 to 2 years.

Offering them a voluntary charge/restriction over the property might also help clinch a deal in installments as it will save them going to Court to get an order for security.

Do you have any other personal creditors you could use to show you they will receive less if you were to be Bankrupted?

 

[Lisa Thomas]

What was discussed about repayment of the DLA with the Liquidators prior to Liquidation?

Did you get any repayment agreement in writing?

What did you put in your Statement of Affairs form as realisable for the DLA?

 

[Contractor75]

Do the spongebob plan, the debts die with the company.

 

[Paul Norman]

The issue here is the overdrawn directors account. That means, effectively, that you have taken money from the company without paying tax on it. The HMRC, understandably, take a very dim view of that. Liquidators, of course, have legal responsibilities beyond helping you.

And that is why the situation is getting tense. You need professional advice, because as things stand the HMRC will relentless come after you for the tax on that overdrawn account. If you are unable to repay the loan to the company, then technically you, personally are bankrupt.

Getting proper help and advice could have a big impact here on how things work out for you.

 

[Lisa Thomas]

Do the spongebob plan, the debts die with the company.

This is not a Company debt - this is a debt the Director owes to the Company.

I believe the Company is already in Liquidation so dissolution is no longer an option.

In any event the Insolvency Services get greater powers to pursue DLAs despite dissolution, from this year so dissolution will not be a guarantee to write off debts (and company's can always be reinstated too)

 

[Contractor75]

This is not a Company debt - this is a debt the Director owes to the Company.

I believe the Company is already in Liquidation so dissolution is no longer an option.

In any event the Insolvency Services get greater powers to pursue DLAs despite dissolution, from this year so dissolution will not be a guarantee to write off debts (and company's can always be reinstated too)

When are these new powers coming? Reading through the forum I was under the impression all debts die when the company is dissolved. The only time HMRC would reinstate if they suspected tax evasion or the amounts were huge.

 

[AllUpHere]

When are these new powers coming? Reading through the forum I was under the impression all debts die when the company is dissolved. The only time HMRC would reinstate if they suspected tax evasion or the amounts were huge.

It's not about new powers, it's about the fact the OP took a fairly substantial sum of money which wasn't his.

 

[Newchodge]

In any event the Insolvency Services get greater powers to pursue DLAs despite dissolution, from this year so dissolution will not be a guarantee to write off debts (and company's can always be reinstated too)

Does that depend on the Finance Bill, which was withdrawn from Parliament last week because May realised she was going to lose an amewndment vote?

 

[Lisa Thomas]

When are these new powers coming? Reading through the forum I was under the impression all debts die when the company is dissolved. The only time HMRC would reinstate if they suspected tax evasion or the amounts were huge.

As stated above this is not about the Company's debts, this is about the debt the Director personally owes to the Company. He is a debtor, not a creditor.

 

[Lisa Thomas]

Does that depend on the Finance Bill, which was withdrawn from Parliament last week because May realised she was going to lose an amewndment vote?

TBH I'm not entirely sure - I haven't seen any updates on it lately, just that timescales are unknown since it was announced last August...