Frequently asked questions

We get asked a lot of questions about self-employed IVAs – so we have put together some useful answers to the most frequently asked questions to give you more information about how a self-employed IVA works.

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  1. Can I carry on trading if I sign up for a self-employed IVA?
  2. How do the self-employed IVA fees get paid?
  3. I owe money to my business suppliers. How can I carry on trading?
  4. Can I keep my business bank account?
  5. Will I lose my home or car?
  6. Will I lose my business assets?
  7. What are the differences between a self-employed IVA and a normal IVA?
  8. What happens if my self-employed IVA is not approved?
  9. What debts can – and cannot – be included in my self-employed IVA?
  10. How will my business debts affect my personal credit rating?
  11. What if my financial situation changes and I can’t make my self-employed IVA payments?
  12. How are self-employed IVA payments calculated?
  13. How long will my self-employed IVA last?
  14. What happens to joint debts in a self-employed IVA?
  15. Will I be able to trade from leased premises if I enter a self-employed IVA?
  16. Do I have to continue paying tax, National Insurance and VAT in a self-employed IVA?
  17. How would a tax rebate be treated in a self-employed IVA?
  18. When would I need to use a Partnership Voluntary Arrangement (PVA)?
  19. What is the Individual Insolvency Register?
  20. Who qualifies for a self-employed IVA?
  21. Could a self-employed IVA affect my business contracts?

  1. Can I carry on trading if I sign up for a self-employed IVA?

Yes. One of the greatest advantages of a self-employed IVA is that you can continue trading. A self-employed IVA is designed to allow you to continue to trade whilst making affordable monthly debt repayments to your creditors.

The Supervisor of your self-employed IVA and your creditors will have no say whatsoever about what you do with your business. You will still have full control of it, and make all the decisions relating to it.

You are the expert at running your business, and so it makes sense for you to continue running it.

However, if your business isn’t making a profit, your creditors may ask you to seek alternative employment in order to provide them with a greater return, when they vote on whether or not to accept your self-employed IVA proposal. If your creditors do ask for this, we will – of course – discuss this with you, before you agree to proceed with your self-employed IVA.

  1. How do the self-employed IVA fees get paid?

Our chosen self-employed IVA provider (PayPlan Bespoke Solutions Limited) don’t charge any upfront fees.

Once they have assessed how much you can afford to pay back each month to your creditors – and after your creditors have agreed to your proposal – you start paying that agreed monthly amount into your self-employed IVA.

The fees for administering your self-employed IVA are simply deducted from the agreed amount you pay every month. So, instead of charging you any additional money, PayPlan Bespoke Solutions Limited take their fee from your agreed monthly payment, and distribute the rest to your creditors.

What’s more – the fees are only deducted after your self-employed IVA has been approved by your creditors, so if anything goes wrong during the set-up process – and your creditors don’t agree to your proposal, you won’t be charged for the work already done for you.

So, to clarify – the agreed monthly payments you make into your self-employed IVA will cover your both the fees for the administration of your self-employed IVA charges as well as your creditor repayments.

  1. I owe money to my business suppliers. How can I carry on trading?

The first thing to do is to decide which of your suppliers you need to keep on paying in order to continue trading.

There may be some suppliers you’ve used in the past, but no longer use. With these suppliers, you’ll need to check if they have any ‘retention of title’ over the goods they supplied to you.

‘Retention of title’ is where they have the right to repossess the goods if they don’t receive payment in full. If they do have ‘retention of title’ and you need to keep the goods, you will be allowed to make payments to the supplier in full so you don’t risk losing the goods.

If the supplier doesn’t have ‘retention of title’ in the goods, then the debt you owe them can be included in your self-employed IVA. In this case, as long as your self-employed IVA proposal is accepted, the supplier will receive their repayments out of the monthly agreed amount you pay into your self-employed IVA.

There will also probably be some suppliers who you still need to use going forward to keep trading. This may be because there is a limited number of suppliers in the market, or because your existing supplier offers the best value of money.

In that case, it should be possible to negotiate a repayment agreement with the supplier – outside your self-employed IVA – so they are repaid in full over time. PayPlan Bespoke Solutions Limited can negotiate with the supplier on your behalf if you wish.

You will have an allocation for repaying ongoing suppliers in your cash-flow to make sure they will continue to supply what you need, allowing you to carry on trading as normal.

  1. Can I keep my business bank account?
Yes, it is possible to keep your business bank account in a self-employed IVA. However, there are a number of factors that you should bear in mind as follows:
  • If your business bank account is overdrawn by a significant amount, then it may be best to include the overdraft as a debt in your self-employed IVA – and open a new bank account to use for your business going forward
  • If your business bank account is only overdrawn by a small amount, and you need this credit facility to help with cash-flow – and pay your suppliers before you get paid by your clients – you can continue using this existing business bank account throughout your IVA. However, you will need to make sure that you don’t exceed your agreed overdraft limits, so that the lender will allow you to continue using the bank account
  • You also need to consider carefully whether you have any other debts with the same bank which operates your business bank account. For example, you may also have a credit card or loan with the same bank – or another bank in the same group. If you do, the lender could decide to use their ‘right to offset’. This means that they could take money out of one of your accounts that’s in credit to repay another of your accounts that’s in debit. This could happen even if one of the accounts is included in your self-employed IVA proposal. If this happens, it could clearly leave you short of money. So, if you do owe other money to the same bank, it is probably best to open a new business bank account elsewhere, to reduce the risk of the ‘right to offset’.

In summary, it is possible to keep your business bank account in a self-employed IVA, but you should make sure you can keep within the agreed overdraft limits, and that there is no danger of the bank using its ‘right to offset’.

  1. Will I lose my home or car?

The aim of an- self-employed IVA is to protect not only your personal assets, but also your business assets.

You will know how your home and car are going to be treated before you agree to the self-employed IVA, so if you don’t agree with the creditors’ decision – or any stipulations they want to include in your arrangement – you can simply reject it and not enter the self-employed IVA.

It would be quite rare if you had to sell your home or your car.

Occasionally, you may be asked to downsize your car (or other vehicles) and pay some of the proceeds into your IVA, but you can always reject this and not enter the arrangement.

If you do agree to this, you will still be allowed to keep enough funds to get yourself a cheaper replacement vehicle, especially if you need it for work or getting about in your daily life.

As a general rule, if the vehicle you need is worth less than £5,000, your creditors will not ask you to sell it.

  1. Will I lose my business assets?

Continuing to make money from running your business is likely to produce the greatest return to your creditors. For this reason, you will usually be allowed to retain your business assets when you enter a self-employed IVA.

It is likely that creditors would receive a lower return if you can’t carry on trading. However, sometimes your creditors may think you could sell an existing business asset and purchase a cheaper replacement. In that case, they may ask you to sell it.

This will be discussed with you before the self-employed IVA is finalised with your creditors. If you don’t agree, the IVA is likely to be rejected – and you will need to consider other possible debt solutions.

  1. What are the differences between a self-employed IVA and a normal IVA?
  • Flexibility – a self-employed IVA looks more at your individual circumstances. For example, if your business income is seasonal, then your monthly IVA payments can be flexed to allow you to vary your payment amount each month, as long as you contribute the agreed total amount over the course of each 12 month period
  • Treating creditors differently – Usually, in a normal IVA, all your creditors are included and treated in the same way. That means they receive a dividend from the IVA in full and final settlement, and write off the remainder of your debt at the end of the IVA. However, with a self-employed IVA, you can prioritise certain creditors if you need to keep paying them in full in order to continue trading
  • Cash-flows – In a self-employed IVA, it is important to include a projected cash-flow for the next 12 months so your creditors can see that the arrangement is sustainable. There is no such requirement in a normal IVA
  • No further credit – In a normal IVA, you can’t usually obtain further credit of more than £500 without the permission of the IVA Supervisor. In a self-employed IVA, it is more likely that you will be allowed to take out further credit, as long as you can afford the repayments and you need the credit to run a viable business
  1. What happens if my self-employed IVA is not approved?

85-90% of self-employed IVAs set up by PayPlan Bespoke Solutions Limited are approved. However, if your self-employed IVA proposal is rejected by your creditors, it’s unlikely that you will have to file for bankruptcy.

Instead, our experienced advisers can talk you through a variety of other debt solutions, and look at which will fit best with your individual financial circumstances.

  1. What debts can – and cannot – be included in my IVA?

Most unsecured debts can be included in your self-employed IVA, including:

  • Credit cards, overdrafts and bank loans
  • Store cards and catalogue debts
  • Payday loans
  • Council tax arrears
  • Utility bill arrears, including gas, electricity, water and phone
  • County Court Judgments (CCJs)
  • Rent arrears from previous properties
  • Loans from family or friends
  • HMRC debts (including benefit over-payments)
Here are some types of debt that cannot be included in your self-employed IVA:

  • Mortgages (and any other loans secured on your property), where the lender wishes to retain their security
  • Amounts owing under Hire Purchase agreements, where you still use the vehicle or item
  • Magistrates Court Fines, including speeding tickets
  • Any debts incurred through fraudulent activity
  • Child support arrears, like CSA
  • Student loans
  • Any debts that are incurred after the approval of your self-employed IVA
  1. How will my business debts affect my personal credit rating?

A self-employed IVA will be noted on your credit file for 6 years from the date it was accepted by your creditors.

Lenders will normally check your credit file when you apply for credit, so you might struggle to find lenders willing to loan you money. Or, if you do find a lender, they might charge you a higher interest rate.

After your self-employed IVA has ended, a note will be added to your credit file to say this has been completed, but it will only be completely removed after the 6 year period.

You are not usually allowed to take out any further credit above £500 without the Supervisor’s permission whilst in a normal IVA. However, in a self-employed IVA, it is more likely that you will be allowed to take out further credit, as long as you can afford the repayments and you need the credit to help you run a viable business.

If you seek credit from trade suppliers, they are more likely to look at alternative sources, rather than just your credit file to assess your credit risk. Such information could include data from previous and current suppliers, financial reports, internet search engines, news and media, telephone and other print directories.

If you are a Director of a Limited Company, they may also use business registration details and financial accounts to help assess your credit worthiness.

  1. What if my financial situation changes and I can’t make my self-employed IVA payments?
We understand that during your self-employed IVA, the income from your business could fluctuate. This in turn could affect your monthly payments into the self-employed IVA, as they are likely to be dependent on your business cash flow.

If you find yourself unable to make your agreed monthly payments at any point during the term of your self-employed IVA, it’s really important to let your Supervisor know as soon as possible so they can help you.

Our chosen self-employed IVA partner has years of experience in assisting people in difficult financial situations, and there may be a variety of solutions available to help you complete your self-employed IVA successfully.

If your financial circumstances change – for example, due to a downturn in business – depending on the terms of your self-employed IVA, you may be able to request a small payment break of up to 6 months, or a reduction of up to 15% in your monthly payments.

If you can’t afford your agreed monthly payments into your self-employed IVA due to a change in circumstances, it is possible to ask your creditors to vote on a revised proposal. If your creditors accept this, then your IVA will continue on the revised terms.

If your circumstances change, you could ask your creditors to reduce your monthly payments, suspend your monthly payments for a period of time, accept a full and final settlement offer to pay off your self-employed IVA early, or even accept what you have already paid into the IVA so far in full and final settlement.

It is obviously up to your creditors whether they accept this revised proposal or not. The same voting rules apply to revised proposals as they do to your initial self-employed IVA proposal – i.e. at least 75% (by value) of voting creditors need to vote in favour of it.

At Payplan Bespoke Solutions Limited, over 95% of all revised proposals are accepted by the creditors.

If you don’t keep up with your agreed monthly self-employed IVA payments, your IVA could fail, meaning that your creditors will be free to chase you for the outstanding debts.
  1. How are self-employed IVA payments calculated?

First, you need to create a business budget for the next 12 months – we can help you with this.

List your projected monthly takings from your business, and then deduct all your planned business expenditure. Then, deduct the monthly tax and National Insurance provision you need to make, and the figure you are left with is your monthly net income from the business.

Next you need to create a personal budget. Write down your monthly net business income (which is the final figure on your business budget) and any other regular income you receive, such as benefits.

Then, write down all your personal household expenditure. This should include things like mortgage or rent, council tax, utility bills, phone, travel costs, housekeeping, clothes, and toiletries.

Once you have done this, deduct your total expenditure from your total net income. This will give the amount you have left over which you can afford to pay into your self-employed IVA.

It is very important to make sure all your regular expenditure is included, so you can live within your budget, and keep your self-employed IVA sustainable.

  1. How long will my self-employed IVA last?

Self-employed IVAs normally last for 5 years. However, if you own your home (or any other property) and you can’t release any available equity to pay into your arrangement, your self-employed IVA may be extended to 6 years.

In addition, the duration of your IVA is reliant on your ability to keep up with the monthly payments agreed by your creditors at the start of your self-employed IVA.

For example, if there’s a downturn in your business and you need to make reduced payments, your creditors may ask for your self-employed IVA to be extended to 6 years in order to compensate them for the reduction in payments.

This will allow your IVA successfully complete, as long as you keep up with the agreed reduced payments.

  1. What happens to joint debts in a self-employed IVA?

Joint debts occur when two or more people have signed a joint credit agreement together. All the people who have signed the joint credit agreement are jointly and individually liable for repayment of the full debt. The most common examples of joint credit agreements are mortgages, loans and overdrafts.

Where there are joint debts and one of the borrowers enters a self-employed IVA, the creditors will usually consider the other borrower to be liable for repayment of the full debt.

It may then be necessary for the other borrower to also consider entering a debt solution of their own – for example, an IVA, bankruptcy or a Debt Management Plan (DMP).

  1. Will I be able to trade from leased premises if I enter a self-employed IVA?

You may still be able to trade from leased premises if you enter a self-employed IVA.

However, there are a couple of things you will need to check:

  • You’ll need to read the lease agreement carefully. In some cases, the lease may state that it will be terminated if you enter an IVA or bankruptcy. If your lease does state this, you’ll need to discuss your financial situation with the landlord of the property – and ask whether they will actually use their right to terminate the lease if you enter a self-employed IVA. If they do agree not to terminate the lease, it’s important to obtain their confirmation of this in writing
  • You’ll need to check that you aren’t in arrears with payments under the lease agreement, as this could result in the landlord not allowing you to keep the property. If you need the property to continue trading, it is – of course – important that you can still keep it if you enter a self-employed IVA
There will be an allowance in your cash-flow to make your lease payments when they fall due – plus repayment of any arrears – so the landlord can see that you intend to keep up with your payments.

Even if the above termination clause is in your lease agreement, this may convince the landlord to ignore this and allow you continue trading from the premises.
  1. Do I have to continue paying tax, National Insurance and VAT in a self-employed IVA?

Any self-assessment tax and National Insurance that you owe up to the end of the tax year in which the IVA was agreed by your creditors can be included as a debt in your self-employed IVA.

Any funds that you would normally have put aside to pay HMRC for the tax year in which your self-employed IVA is approved should be paid into your arrangement in addition to your agreed monthly payments. Your Supervisor will then distribute this to your creditors in the self-employed IVA.

This does not adversely affect you – it just means you pay your tax and National Insurance provision for the tax year in which your self-employed IVA was agreed into your arrangement, rather than putting it aside to pay to HMRC.

You will then need to pay all your tax and National Insurance direct to HMRC as normal in all future years during and after your self-employed IVA.

Any outstanding VAT owed up to the date of approval of your self-employed IVA by your creditors will be included in your arrangement as a debt. You will then need to pay all your VAT direct to HMRC for the remainder of your self-employed IVA.

It is really important to submit all your tax and VAT returns on time to HMRC, to avoid incurring any interest and penalties.

  1. How would a tax rebate be treated in a self-employed IVA?

If you are due a tax rebate for either a tax year prior to the approval of your self-employed IVA, or for the tax year in which your self-employed IVA was approved, HMRC will – in most cases – either send the rebate directly to your Supervisor, or offset it against the outstanding balance on your HMRC account.

HMRC will send rebates directly to you for any tax years after the tax year in which your self-employed IVA was approved. You will need to contact your Supervisor to let them know you have received a rebate.

They can then consider with you whether you can keep the rebate or not – for example, you may have earned less income in that tax year compared with your projected cash-flow.

  1. When would I need to use a Partnership Voluntary Arrangement (PVA)?

A Partnership Voluntary Arrangement (PVA) is normally an option when a Partnership is unable to pay it’s debts. If agreed by the creditors, the Partnership would then make monthly agreed payments into the PVA, usually for a period of 5 years.

All members of the Partnership would need to agree to the PVA. This allows the Partnership to continue trading, with protection from creditors. It also has the benefit that only the Partnership’s assets and liabilities are disclosed – not your personal ones.

Usually, the individual Partners will also have personal debts, so they could propose self-employed IVAs for themselves, as well as a PVA for the Partnership.

Clearly, if the Partnership experiences a downturn in business, this is likely to affect the payments into the Partners’ own self-employed IVAs. If this happens, it’s important to contact your Supervisor who can consider the options available to you, such as asking your creditors to reduce both your PVA and self-employed IVA payments.

  1. What is the Insolvency Register?

The Insolvency Register lists all people who are in an IVA, bankruptcy or Debt Relief Order (DRO). The Insolvency Service has a legal obligation to keep this register up-to-date, and available to the public.

You can search the register by clicking on the following link: https://www.insolvencydirect.bis.gov.uk/eiir/

  1. Who qualifies for a self-employed IVA?

First and foremost, self-employed IVAs are only available to people who live in England, Wales and Northern Ireland. If you live in Scotland, you should look for information about Trust Deeds instead.

In order to qualify for a self-employed IVA, you must be self-employed, struggling to repay your creditors, have a minimum of £7,000 in unsecured debts, and be able to afford a minimum of £50 per month to put towards repaying your creditors.

  1. Could a self-employed IVA affect my business contracts?

Nowadays, entering a self-employed IVA should not affect your business contracts.

However, it is worth checking your existing business contracts, just to make sure they don’t contain any clauses which prevents you from entering a self-employed IVA.