A trader proposing to do an IVA should be aware that HM Revenue & Customs (HMRC) now try and insist on completion of Self Assessment (SA) returns before supporting the proposal.
This is because for self employed debtors, it is unlikely that HMRC will be able to submit a final claim in the IVA much earlier than ten months after the approval of the IVA and in practice it can be much longer than that – up to twenty two months where debtors are tardy in submitting their returns.
HMRC much prefer that the debtor demonstrates his compliance by submitting all returns quickly so that, in turn:
Accordingly, where HMRC support an IVA (vote to accept the proposal) either the overdue returns have been submitted prior to approval of the IVA or its approval is conditional on the returns being submitted within three months of the date of approval. This three months window is only permitted in exceptional circumstances. HMRC also expect Income & Expenditure and cash flow forecasts to provide for future tax liabilities and they expect to see a guarantee within the proposal that future returns and payments will be provided on time.
HMRC reserve the right to discuss the content of a proposal and supporting documentation with any listed creditor or any creditor confirmed by the nominee. If a proposal is inadequate, HMRC will ask for the offer to be improved and expect the debtor to change the proposal voluntarily. If this is not forthcoming, HMRC will propose modifications.
In the first article we looked at some of the routine reasons where HMRC will reject proposals and the factors which incline HMRC to support proposals. There are also some exceptional reasons which cause proposals to be declined. These are some examples: