Helping a client in tax debt: Part 3

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If you have clients who have fallen on hard times, you may wish to let them know about alternatives to bankruptcy.

In this final article in TaxAid’s tax debt series, Tina Riches and Ian Browne look at other formal steps down the tax debt route and provide links to helpful guidance and organisations.

Debt relief orders

If your client has debts but can’t raise the money for a debtor's petition for bankruptcy, then they may want to apply for a debt relief order (DRO). This procedure was introduced to help those who owe relatively little money, have little or no disposable income and no assets to repay what they owe, but cannot afford to make themselves bankrupt.

DROs cost £90 and are administered by authorised intermediaries (many of whom are advisers in Citizens Advice). The main requirements are:

  • you are unable to pay your debts;
  • you owe up to a maximum of £20,000;
  • your total gross assets do not exceed £1,000; and
  • after taking away tax, national insurance contributions and normal household expenses, your disposable income is no more than £50 a month.

There is more guidance on DROs in getting a debt relief order published by the Insolvency Service. In Scotland, there is a similar process, the minimal asset process.

Serious decision

Petitioning for bankruptcy or a DRO is a serious step, with possible pitfalls depending on your client’s situation, so it is important you get good independent advice before going ahead.

This advice can be obtained from a money adviser in a Citizens Advice office or other voluntary organisation, or from a registered insolvency practitioner.

The following links provide useful bankruptcy information:

Be proactive!

If your client has not yet fallen behind with their tax payments but expects to receive a demand in the near future that they will be unable to pay, contact HMRC’s Business Payment Support Service (BPSS) as soon as possible on 0300 200 3835.

The BPSS can agree on a payment arrangement in advance, which may be easier than negotiating with DM.

Further detail on tax debt can be found on our TaxAid website.

Low-income taxpayers in need of tax debt advice can call the TaxAid call line. We will not act for represented clients, but in other cases, such as if you wish to refer a contact to us, agents can call our advisers helpline.

Kilimanjaro! You can do it!

See our fundraising page on the Bridge the Gap website, including details of our #Tax2020 Kilimanjaro challenge, when a team of tax professionals will attempt to reach the summit. There is also more information, including details of our information evening on 24 September 2019.

The tax charities would be delighted if you could join us in this challenge, to have fun, test your endurance and fundraising skills!

About Tina Riches and Ian Browne

Tax Aid

Tina Riches (volunteer) and Ian Browne (technical manager) are part of TaxAid and Tax Help for Older People

TaxAid and Tax Help are charities that assist vulnerable people on low incomes with tax issues. We need to raise over £300,000 over the coming year just to maintain the current service – and more to scale up to meet demand. To learn more or support this vital work, go to www.bridge-the-gap.org.uk.

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