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Bankruptcy and income tax


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Hello,

 

I went bankrupt back in May. This month I noticed on my pay slip that there was no income tax taken out of the salary. I'd thought last month that my pay was too much, but I knew I was due a back payment so didn't think anything of it - then when it was the same this month, I checked in more detail.

 

This has only been for the last two months, before that tax was taken as normal.

 

I have signed the Receiver's form to say they can take the tax directly from my account. I knew to expect this, and assumed it was happening.

 

So that means I have spent about £250 last month which I shouldn't have done... help! I've put aside the extra this month in a separate account, but can't find another £250 straight away.

 

When will I be asked for this back, and will I be expected to pay it on the spot?

Please note I'm not insured in this capacity, so if you need to, do get official legal advice.

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I didn't know this happened when you went bankrupt! Is it because the receiver has access to your full income and the taxman can't take it directly from you? I would have thought if that were the case then the receiver would be responsible for paying the tax (or a proportion of it) on your behalf. I would be interested to know the reason for it.

BANK CHARGES

Nat West Bus Acct £1750 reclaim - WON

 

LTSB Bus Acct £1650 charges w/o against o/s balance - WON

 

Halifax Pers Acct £1650 charges taken from benefits - WON

 

Others

 

GE Money sec loan - £1900 in charges - settlement agreed

GE Money sec loan - ERC of £2.5K valid for 15 years - on standby

FirstPlus - missold PPI of £20K for friends - WON

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from Income Payments Agreements and Income Payments Orders :

 

 

 

Applying a 'Nil tax' code

 

If you pay tax under PAYE, HM Revenue and Customs (HMRC) will usually apply a 'nil tax' code to you for the rest of the tax year in which you were declared bankrupt. This means that soon after your bankruptcy, your employer will be told NOT to take any more income tax from your wages for the rest of the tax year. HMRC applies nil tax codes for various reasons, and the new tax code will not tell your employer you are bankrupt. The nil tax code does not mean no tax is due. It just enables HMRC to claim the whole of your unpaid tax for the year of your bankruptcy.

 

There will be extra money in your pay because of the nil tax code. This money will form the basis of an IPA or IPO, even if you have no other real disposable income. A nil tax (or NT) IPA or IPO may be the only amount you have to pay, and the agreement or order will stop when your tax code changes. If you have other real disposable income, the IPA or IPO will reduce when your tax code changes.

 

Example

 

Say you were made bankrupt on 15 September 2006 and after all spending is deducted you have real disposable income of £300 a month. It is likely you will have an IPA or IPO to pay £150 a month for 36 months. If you were in PAYE employment, a nil tax code would mean your income for a short period would be higher than normal. Part of your IPA or IPO would be a nil tax IPA or IPO for the tax you would have paid if you have not been made bankrupt, say £400 a month In those circumstances you would pay £150 a month from the date of the IPA or IPO for 36 months, and an extra £400 from the date the HMRC gave you a nil tax code, up to and including March 2007 when the tax year ends (about 6 months).

i will be off site for the next month or so. if you have any problems, feel free to report the post so a moderator can help you.

 

I am not a qualified or practicing lawyer.

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Right - glad you cleared that one up ??? I have read it three times and just printed it out for OH - and neither of us are any the wiser.

BANK CHARGES

Nat West Bus Acct £1750 reclaim - WON

 

LTSB Bus Acct £1650 charges w/o against o/s balance - WON

 

Halifax Pers Acct £1650 charges taken from benefits - WON

 

Others

 

GE Money sec loan - £1900 in charges - settlement agreed

GE Money sec loan - ERC of £2.5K valid for 15 years - on standby

FirstPlus - missold PPI of £20K for friends - WON

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it means that HMRC stop charging income tax soon after bankruptcy (until the end of the tax year, in April), and you need to be able to pay this money to the official reciever pretty much without notice. Frankly, the OP should call up the OR and explain what happens, after he/she has a good plan on how to repay the money.

 

Otherwise, the money could be taken from OP's bank account at any time, without notice.

i will be off site for the next month or so. if you have any problems, feel free to report the post so a moderator can help you.

 

I am not a qualified or practicing lawyer.

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What happened with us is, the OR decides how much tax you pay each month/week in my case £105pm. This you agree with the OR. Overtime is not taken into account, its based on your normal yearly salary. They apply for the NT tax code and inform you that they have done so. We were then contacted by an outside company that takes over from the OR for collecting the tax from you. When your tax has been paid to you, you have to inform this company that it has now benn paid to you and you need to send a copy of that months payslip to them for them, to verify that it has all gone through, they then send you details of where to send the money too. It will only last until the end of the tax year, eg March/ April.

Dont know if this is the same in all areas, but here in Essex it is.

Tip us a wink on my scales if you think I may have helped at all;)

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Thanks Tau, that makes sense. In other words the OR tells the taxman how much tax he is going to get - I LIKE IT!:p Because of course the revenue no longer have preferential creditor status.

BANK CHARGES

Nat West Bus Acct £1750 reclaim - WON

 

LTSB Bus Acct £1650 charges w/o against o/s balance - WON

 

Halifax Pers Acct £1650 charges taken from benefits - WON

 

Others

 

GE Money sec loan - £1900 in charges - settlement agreed

GE Money sec loan - ERC of £2.5K valid for 15 years - on standby

FirstPlus - missold PPI of £20K for friends - WON

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Just wish someone had explained to me what was going to happen back in May when I went bankrupt!

 

Going to call the OR, I can pay them £300 at the moment but no more than that, as that's pretty much all I have in my account at the moment after the bills have come out.

Please note I'm not insured in this capacity, so if you need to, do get official legal advice.

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