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[Abs]

Hi everyone. I am wondering if I can include a debt to HMRC in a debt management plan? I am basically almost set up with a debt management plan but I have just found out that I owe around £1,000 in underpaid tax. Can I add this into my debt management plan? And what happens if I can't?

[Melissa S]

Hi there Abs and welcome to the forum

Unfortunately you cannot include any HMRC debts in a DMP. HMRC feel that as it is an informal agreement there is too much risk of not getting their money back.

AN IVA or Bankruptcy does include HMRC debts, Is there a reason you have not considered these debt solutions, are you a homeowner with equity?

As far as dealing with the HMRC debt you will need to make a provision to pay this back alongside your DMP. You will need to talk to HMRC and try to sort out a payment plan.

If you can give us a few more details about your debt situation we may be able to help further. How much debt do you have, are you a homeowner etc?

[Geraldine]

Hello Abs

The reason why HMRC will not normally agree to be included in a DMP is that it will simply take too long for them to get their money back. On paper it will normally take many years to repay your debt using the DMP solution and HMRC will normally want debt owed to them to be repaid in 12 months max.

One option is making an agreement to repay HMRC with part of the disposable income you have however this will probably leave you with next to nothing to start a DMP with your other debts.

This is the reason why most people who owe money to HMRC actually go for an IVA or bankruptcy rather than a DMP. Have you considered either of these options?

[Abs]

Hello, I was self employed but have got myself a new job on PAYE as my previous job wasn't paying any longer. This was the main reason for my debts. Basically I owe £31,500 and then the tax on top. I own my house with my partner and we have next to no equity but the house is the reason I don't want to go bankrupt and why I chose the debt management plan instead. I have set up a payment with the tax man to pay £100 per month and my debt management plan is £250 per month. Hopefully things will get easier when the tax debt has been paid off.

[Melissa S]

Hi Abs

i understand that you are concerned about your house if you go bankrupt but as there is little to no equity in it there is very little risk to your home. The official receiver would take your title deed and look at any beneficial you have in the house not your partners. if there is no to little equity you would have the option of buying back your beneficial share from the OR for a nominal fee of around £1000. If you did this then there would be no risk to your house in the future if there was a substantial equity increase.

If you did not buy back your beneficial share then the OR has up to 3 years from the start of your bankruptcy to see if there is a rise in the equity, if there is then they would simply put a charge on your home for this amount for when you sell in the future and if there is no rise then the title deed passes back to you with no further future action.

I did a quick calculation based on the information you have provided and it will take you roughly 10 years to pay off your DMP. If you went bankrupt and could afford to pay towards your debts you would be debt free within 3 years.

I would advise getting a quick sale valuation from a few estate agents to see the average equity amount and if there is less than 5k then the OR will be highly unlikely to look to release this as it would cost as much to enforce this and sell the house.

I have attached a link to an article I think you will find helpful. Stay in touch and ask if there is anything you need help with.

bankruptcy and my house

[Melissa S]

Hi Abs
Sorry I forgot to add that any HMRC debt would be included in your bankruptcy.

[Abs]

Thank you for your reply Melissa. I have an estate agent coming next week to value our house so I will see how much if any equity I have and then decide what to do from then. I think that would be the ideal thing for me to do as long as our home is safe as I don't really want to have this hanging around my neck for the next 10 years.

[Melissa S]

Hi Abs

Let s know what the estate agents say, remember it is good to get a few valuations and say you want a quick sale. you can just say your circumstances changed later.

If you do decide on bankruptcy it may be worth having a chat with one of the experts at beat my debt, they will guide you through the process. And of course you can keep asking questions on this forum.

Please keep in touch

[Geraldine]

Hi there Abs

Given that you have total debts of £31,500 + £1000 in tax and can afford to pay £250-350 in total towards the debts then I feel that a you should be considering either an IVA or Bankruptcy rather than a DMP.

If it turns out that there is little or no equity in your property then bankruptcy might be a good idea as you will only have to make on-going monthly payments for 3 years. Given house prices are rising it would be advisable to buy back the beneficial interest in your property straight away though.

If there is more equity in the property than you thought then an IVA might be a better option. Please let us know how much the valuation comes out at and we can then advise you further.

[Abs]

Hi all, I got the house valuations. It was valued at around £125,000 and my mortgage is around £97,000, although it may be a little more than that now as I have about £300 arrears which they are allowing me to add on the end. So this rules out bankruptcy doesn't it? Will my house be affected in an IVA?