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Facing up to HMRC debt as a sole trader

Date Added: 05/01/2016  

HMRC debt can be particularly stressful and perhaps even frightening for sole traders, as there is no distinction between you and your business. The fact of the matter is that HMRC can come after you for the money, and if you don’t have the cash, then there is a real danger that you could lose your home.
 
Act fast to protect your home for you and your family
 
As a sole trader, it is even more important that you act fast, engage with HMRC and find a solution to your debt crisis. Debt management is important, and if you are able to pay within 12 months, then it may still be possible to arrange a Time to Pay arrangement or TTP.
 
HMRC Debt Collection: What if you can’t pay?
 
If you can’t pay off your HMRC debt within a 12-month time frame, then using a business recovery service such as 4R may enable you to extend a TTP by a few more months, but if you need longer to pay then there is another solution you can investigate - an Individual Voluntary Arrangement.
 
What is an Individual Voluntary Arrangement or IVA?
 
An IVA is an agreement or payment proposal put to creditors to pay what you can realistically afford i.e. less than the total debt. An Insolvency Practitioner “nominates” a fair and realistic amount to be paid back over a given time frame. For example, this could be 25 to 50% of the debt over five years. Creditors will usually accept a voluntary arrangement if it provides a better outcome for them than you going bankrupt.
 
If HMRC is made aware that you are preparing an IVA, they will usually put their debt recovery on hold, which can act as a way to prevent them taking legal action against you.
 
Should I borrow money to pay the HMRC debt?
 
DO NOT take on personal borrowings to pay the HMRC debt. If at some point in the future you become unable to service the debt, this could lead to further problems with other debt collectors. Ultimately you could have assets seized and lose your car, your van or even your home.
 
Should I consider bankruptcy?
 
In some cases, bankruptcy may be the best option, but it is extremely important to take professional advice on this, as there may be solutions you have not considered. While you may have spoken to your accountant or solicitor, they are not always best placed to advise you, as this is unlikely to be their main area of expertise.
 
Why speak to a debt recovery company?
 
At 4R Business Recovery, we take sole traders, partnerships, limited companies and LLPs through this process all the time, and we understand it in great detail. Whether you owe PAYE, VAT or Corporation Tax, we can talk you through your options, talk to HMRC on your behalf and help you face your HMRC debts so you can sleep better at night.
 
If you’re not dealing with your HMRC debt because you don’t know what your next move should be, or you’re worried about talking to the tax people, call 4R now on 0800 90 20 123 and let us help you. Alternatively, you can get in touch via our contact form.

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