Does an IVA affect tax?

No, everything will be fine as long as you make your IVA payments as agreed and keep up with any ongoing tax payments. HMRC are used to dealing with IVAs.

If you enter an IVA, your insolvency practitioner (IP) will ask about any potential sources of extra money that could be used to repay your debts.

This includes money that might be owed to you by HMRC, such as tax rebates. But your IP is unlikely to check directly with HMRC about money you are owed.

It’s your responsibility to declare any expected refunds or payments. You will also be required to provide proof of income at regular intervals during your IVA, including bank statements, so your IP will see any lump sums being paid into your accounts.

If tax debts are included in your IVA, your IVA provider will contact HMRC, exactly as they would with any other creditor.

Most IVAs include a windfall clause. This means if you receive a lump sum of money of more than £500, you will usually be expected to pay it into your IVA.

Check with your IP to confirm if this is the case for you.

Although your tax code won’t directly affect your IVA, it’s a good idea to check that it’s correct.

Otherwise, you could end up paying too much tax and this is money that could be going to your creditors.

Yes. IVAs often include tax debts such as unpaid income tax or VAT.

But some tax-related penalties, such as anything related to fraud, might not be covered, so check with your IP to see what can be included.

If you’re looking to include tax debt in your IVA, HMRC will get the opportunity to vote on whether to accept your proposal or not, like any other creditor.

Creditors tend to consider: 

• the amount owed
• your financial circumstances
• the terms of the arrangement

For an IVA to be approved, at least 75% of voting creditors (by debt balance) must agree to the proposal. 

HMRC is often a major creditor in IVAs that include tax debt, so their vote could potentially make a big difference. 

HMRC might reject an IVA if they believe: 

• the offer is too low
• you have a history of non-compliance
• they have concerns about financial conduct

They’re more likely to accept an IVA if: 

• the proposed repayments are reasonable
• the plan is sustainable
• it offers a better return than bankruptcy
• you’ve been compliant with tax filings
• you have a good track record of paying on time

there’s no evidence of fraudulent activity

Any debts that can be included in an IVA will need to go in there. It’s important creditors are treated fairly. This means you must tell your IVA provider about all your debts, including money you owe to HMRC.

If you fail to disclose any debts, your IVA: 

• may not go ahead
• may not complete successfully