I am in the final year of my IVA. I have a limited company which I am the sole director. My last set of accounts show a profit of £7K.
Would my IP ask for some of this. If they will, how would they request it, increase in wage or lump sum.
The reason I would like to know is that this years trade has not been as good due to one thing and another and I have had to use some of the profit to keep things going.
Is there anything written into your IVA proposal which requires you to produce your company accounts, and thus account to your IP for any share of increased profits?
Hi Melanie, thanks for the response. The only thing I can find is a modification which says, "A full review of the debtor's income and expenditure will be undertaken annually by the supervisor and will be incorporated into the annual report to creditors. This must include a copy of the Debtor's latest P60. Where net income has increased (including any routine overtime) the Debtor shall increase contributions by 50% of the net surplus (after taking into account costs of living) commencingin the month following the review."
Hi Melanie, thanks for the response. The only thing I can find is a modification which says, "A full review of the debtor's income and expenditure will be undertaken annually by the supervisor and will be incorporated into the annual report to creditors. This must include a copy of the Debtor's latest P60. Where net income has increased (including any routine overtime) the Debtor shall increase contributions by 50% of the net surplus (after taking into account costs of living) commencingin the month following the review."
My understanding is that you have to release profit by way of dividends but not in a way that will affect the running of your business so my feeling is that you will be ok. Like most questions only your own IP can give you the definitive answer
If this is all the proposals says about increases in your income, then you only need to provide your IP with details of your payslips and P60. I am, however, rather suprised that as a company director you are not also required to provide the company's trading accounts as part of an express term of the proposal, as you could be paying yourself a lower salary and allowing reserves to build up in the company (not for a minute suggesting this is the case in your case!) And as dividend income is also classed as income, the level of distributions you make to yourself over the year also needs to be taken into account.
Hi Melanie. I have always been asked to supply my company accounts which is logical. I prefer the IP to see them so that I don't have any nasty shocks.
The £7k has built up over the 4 years and my IP has seen this on a yearly basis. The last set of accounts showed £5K and they didn't ask for any additional contribution.
My worry is that the accounts are over 12 months old when the review is done and a lot of things change.
I would say that a £7k profit forms a modest reserve which you probably need to fund the ongoing working capital requirements of the business. If you are asked to pay something over, which you feel is unaffordable, then do put a robust case forward. You are quite correct to point out that accounts can often be almost a year old when they are finalised and filed.
