Over the past few months there have been numerous press articles concerning the increasing level of personal insolvencies and in particular Voluntary Arrangements (IVA’s). IVA’s were introduced in England and Wales in 1986 followed by Northern Ireland in 1989. Initially, they were aimed specifically at trading businesses and the self employed but are now most commonly used by individuals who have amassed uncontrolled levels of unsecured debt.
Q: What exactly is an IVA?
A: An IVA is a legally binding agreement between a debtor and their creditors with the aim of returning more money to creditors than could be recovered in bankruptcy. It is usually (although not always) for 5 years and involves 60 monthly affordable payments and at the end of the term any remaining debts are legally written off.
Q: Can I continue to trade?
A: The purpose of an IVA is to allow viable businesses and individuals to continue to trade by removing the burden of debt and threats of legal action. Businesses can struggle due to a multiple of reasons beyond their control and bankruptcy or liquidation may not be the most suitable options for the traders, creditors or employees. In bankruptcy and liquidation not only do creditors lose what is currently owed, but the possibility of future recovery by way of ongoing business is removed.
Q: I have arrears of Income Tax/VAT/PAYE. Can these be included in IVAs?
A: HM Revenue and Customs consider all voluntary arrangements on an individual basis and wil support those where:
– There are no exceptional reasons for rejection, such as fraud or previous disregard to statutory obligations.
– Debtors are honest in their financial disclosure.
– The debtors offer is their best available but also viable and achievable.
– The proposal shows provision for all future debts to be paid on time.
– All creditors are treated equally.
In essence HMRC work with insolvency practitioners to support businesses in temporary financial difficulties. All crown liabilities can be included but future liabilities must be paid on time. In addition, not withstanding that the debtor cannot pay monies due, all outstandingreturns must be submitted to enable HMRC to quantify their claim and all future returns must be submitted by the due date.
McCambridge Duffy are a firm of leading chartered accountants and one of the largest insolvency practices in the U.K. We specialise in helping self employed individuals. Should your business be experiencing any financial difficulties call free on 0800 043 3328 where one of our highly experienced staff will be available to help you.