| If you are struggling financially and owe money to | | | | any outstanding debts are written off. |
| HM Revenue and Customs such as tax or VAT, | | | | Given that Tax and VAT debts can be included |
| you will need to take action to avoid a petition | | | | within an IVA, this solution will often be the first |
| being made for your bankruptcy. We consider | | | | which you should to consider if you owe money |
| which debt management solutions are appropriate. | | | | to HMRC. |
| The most common reason for owing money to | | | | However, if you are a home owner you will need |
| HM Revenue and Customs (HMRC) is that you | | | | to be aware that carrying out an IVA may |
| are or have been self employed and have fallen | | | | require you to release equity from your house to |
| behind with the tax or VAT that you owe. | | | | increase the amount you repay to all of your |
| Even if you are employed, it is possible that you | | | | creditors. |
| have to complete a self assessment tax return | | | | The possibility of declaring yourself bankrupt |
| and then find yourself in a position where tax is | | | | Bankruptcy is generally used if you owe money |
| due which you cannot afford to pay. | | | | that you really have no hope of repaying. |
| If you do get yourself into a position where you | | | | You can include virtually all unsecured debts in |
| cannot pay tax debts, you do need to take | | | | bankruptcy including personal tax and VAT debts |
| action. If you ignore these, HMRC are one of the | | | | as well as debt such as council tax arrears. |
| few creditors who will act to petition for your | | | | If you declare bankruptcy, all of your debts are |
| bankruptcy. | | | | taken away from you. You can continue to work |
| There are a number of possible debt solutions | | | | as an employee or on a self employed basis. |
| that you could consider. The most common is | | | | However you would not be able to act as a |
| known as a debt management plan (DMP). This is | | | | director of a company for the period of your |
| an agreement with your creditors to reduce the | | | | bankruptcy which is normally twelve months. |
| amount you pay to fit within a manageable | | | | The major problem with bankruptcy is however, |
| budget. | | | | that if you are a homeowner, you may risk losing |
| Debt management plans are often the least useful | | | | your house unless there is little or no equity in it. |
| solution when dealing with tax debts. This is | | | | As such, you must not decide to declare yourself |
| because it can be difficult to get agreement with | | | | bankrupt unless you have taken advice from a |
| HMRC to accept a reduced payment plan which | | | | specialist personal debt expert. |
| also leaves enough money available to negotiate | | | | If you find yourself in a position where you have |
| with your other creditors. | | | | outstanding tax or VAT debts, you must not put |
| Is an IVA the answer? | | | | your head in the sand and hope that they will |
| An individual voluntary arrangement (IVA) is a | | | | simply disappear. |
| more formal debt solution. In fact, when IVAs | | | | Unlike other debts owed to banks or credit card |
| were introduced into English law in the mid 1980s | | | | companies, if you do not pay the money that |
| they were specifically designed with business and | | | | you owe to HM revenue and customs, you could |
| self employed people in mind. | | | | easily find that a petition is made for your |
| An IVA allows you to offer reduced payments to | | | | bankruptcy. |
| all of your unsecured creditors including HM | | | | The key is to take action quickly which will give |
| revenue and customs. At the end of the | | | | you the best chance of finding the most |
| agreement which normally lasts for five years, | | | | appropriate solution for you. |