What happens if hmrc make me bankrupt

This is a very difficult test to pass. There are three specific conditions which need to be fulfilled in order to obtain Special Relief. These are:. This is a very strict test to pass. It is not enough that the estimated bill is much higher than bills in other years, or that you could make a better estimate of the amount due. The guidance shows how narrow the scope of the relief is.

These groups might include, for example, employees, non-residents, or those due a refund under CIS. Clients in categories such as these, might find it difficult to establish a right to Special Relief on the terms outlined under the guidance. There must also be acceptable evidence of the correct tax liability.

When a claim is made for Special Relief, the tax returns for the relevant year s — and any other outstanding years must be submitted those for the relevant years should be submitted with the claim. If you're struggling to pay let them know, otherwise they'll assume that you're avoiding making your payments. Business Debtline can give advice on important business debts such as HMRC and business rates, and support if creditors take court action.

They can help review business finances and decide the next steps to take. Business Debtline is completely free, confidential and independent. Their website also contains guides, fact sheets and sample letters, as well as a business and household budget tool.

If you don't pay your HMRC debts including any tax credit overpayments , further action can be taken against you such as:. You can find more details about how this works on our bankruptcy from creditors page. HMRC don't need to obtain a court order to visit your business premises and take your stock and equipment up to the value of the debt that you owe them.

If you don't have enough stock or goods at your business premises to cover the debt, the bailiff officially known as an enforcement agent can go to your home and take goods from there. If you stop the HMRC officials from entering your business premises or home they can get warrant to break in. If they apply for a CCJ you'll be sent some court forms.

You need to fill these in and offer an affordable monthly repayment amount. Find out how to fill in these forms using our easy to follow CCJ guide. If you don't pay the CCJ they can use enforcement methods including applying for a charging order to attach the debt to your property. You'll need to attend this with your business and household budget, to support an offer to pay by instalments. If you don't keep to these instalments another hearing will be arranged to decide whether you should be sent to prison.

If you work for an employer, HMRC can collect a debt by altering your tax code to increase the amount of tax deducted from your wage. HMRC can take money to pay tax and tax credit debts directly from savings held in banks and building society accounts.

You can ask the court not to make you bankrupt but you will most likely need to pay the debt or prove to the court that you do not owe the money. The early stages of a bankruptcy are normally handled by an official receiver. An official receiver works for the Insolvency Service and is attached to the court.

They will also be your trustee unless an insolvency practitioner is appointed to take over that role. The trustee will realise sell any assets except any reasonable domestic items and items needed for your job.

The official receiver will write to you within 2 weeks of the bankruptcy order being made, explaining what you need to know and what you must do. There are also things you cannot do while bankrupt. These are called restrictions. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person, if you prefer.

You must attend the interview and cooperate with the official receiver. If you do not, your bankruptcy could be extended beyond the normal 12 months and you could face an examination in court.

The more organised you are, the more straightforward the process will be. Before the interview, telephone the official receiver to confirm or rearrange the appointment; let them know if:. If you have been sent a questionnaire, fill it in, and note down anything you do not understand. If you cannot provide all the necessary information or the examiner needs more time to complete their enquiries, you might be asked back to another appointment.

After the interview, the official receiver will send a report to your creditors showing your assets and debts. This usually takes less than 8 weeks, though it can take up to 12 weeks. They will also report to the insolvency Service if they think you might have broken the law in your financial dealings. The official receiver will take control of your assets unless an insolvency practitioner is appointed. An insolvency practitioner is usually an accountant or solicitor.

The law says you must cooperate fully with them. The trustee will sell your assets and tell the creditors how the money will be shared. Creditors must then make a formal claim.

You cannot make payments directly. If you have assets, money from the sale of these will be used to pay the costs of the bankruptcy process before creditors are paid. If your case is administered by the official receiver the following fees will all be deducted from the money realised:.

If there are insufficient assets in your case the official receiver will still process your bankruptcy. Any money left over will be returned to you. If everyone is paid in full including the fees referred to above and interest on the debts you can apply to have your bankruptcy cancelled annulled. If your bankruptcy is being handled by an insolvency practitioner then the administration and the general fees will still be charged, but they will charge their own schedule of fees rather than the asset realisation and distribution fees that the official receiver would charge.

You should ask them how much it will cost to administer your case. You must keep paying rent and any new debts after the bankruptcy. You might not need to pay bills that are unpaid at the date of your bankruptcy order. You may have to pay a deposit for future supplies of gas, electricity or other utilities. Or your utility accounts may be transferred to a spouse or partner.

If these items are valuable they can be taken by the trustee and replaced with a cheaper alternative. The restriction will be removed once the trustee has been paid for their interest in the property. You can still sell the property, but the trustee will get your share of the money from the sale. The Form J restriction will be removed once the trustee has been paid this money. The trustee cannot usually sell the property without your agreement for a year from the date of the bankruptcy order if you have a partner or children living with you.

You can stop a sale taking place later if a family member or friend buys the beneficial interest in your home. The buyer should contact the trustee. The restriction at Land Registry will be removed. A charging order fixes the amount the trustee will get from the property when it is sold.

If you co-habited with your partner and have now separated, the property that they or your children live in is not a family home. If you are behind with your rent your landlord can still apply to evict you even if the rent arrears are included in the bankruptcy. Your bank account will be frozen. Any money in your account will be an asset and claimed by the trustee. The trustee can ask to release some money:.

The bank is allowed to use money from one of your accounts to pay your debts on another account you hold with them. The exception is if the bank has a charge on your home security for payment of a loan like a mortgage. Most pension schemes are not included in your bankruptcy for bankruptcy orders made after 29 May and they cannot be claimed by the trustee. Approved or registered pension schemes are usually:. If your pension scheme is not an approved or registered scheme you might be able to exclude it from your bankruptcy by:.

This will involve you paying some of your debt with your income. If you are able to take money from your pension following changes to the law in April , but have chosen not to do so, the trustee may look at the value of your available pension fund. If this would give you access to enough money to make a different arrangement to pay your creditors, the trustee can ask the court to cancel annul the bankruptcy.

If you die while bankrupt the trustee will claim any death benefit, usually a lump sum payable from the pension, where a person has not already been nominated to receive the benefit. If a person has been nominated within the pension scheme to receive the death benefit, it will still be paid to them.