Equity Clause from HMRC

[davejack]

Hi all,

I wonder if I could ask an opinion on my equity clause please. I am coming up to my second year point in June and as HMRC was my biggest debt they added a few additional amendments to my IVA. My IVA was for £95,000 and my payments are, 1st year £1300 per month, 2nd year £900 per month and then £500 per month to the end (5 Years). Although it has been tough, I have learned a lot of lessons and severely tightened my belt. My issue is that HMRC have asked that at my 2 year point I pay equity of £32,000 into my IVA so at the start of next month I will be contacting a mortgage broker to apply for a re-mortgage. I have learned this will be very difficult and I may not get this. My house is valued at £75,000 and have £22,000 outstanding. My worry is I will not be able to release the equity and HMRC will stop the IVA. Do you think they may give me other options when they have worded the clause like this?

The debtor will introduce a lump sum estimated at £32,000 after the second year of the arrangement, being the proceed of the remortgage of (my home). Failure to introduce these funds within the period will constitute a breach of the arrangement that cannot be remedied.

Pre IVA worry and panic is starting to set in again.

Thanks for any advice.

[Foggy]

Hi all,

I wonder if I could ask an opinion on my equity clause please. I am coming up to my second year point in June and as HMRC was my biggest debt they added a few additional amendments to my IVA. My IVA was for £95,000 and my payments are, 1st year £1300 per month, 2nd year £900 per month and then £500 per month to the end (5 Years). Although it has been tough, I have learned a lot of lessons and severely tightened my belt. My issue is that HMRC have asked that at my 2 year point I pay equity of £32,000 into my IVA so at the start of next month I will be contacting a mortgage broker to apply for a re-mortgage. I have learned this will be very difficult and I may not get this. My house is valued at £75,000 and have £22,000 outstanding. My worry is I will not be able to release the equity and HMRC will stop the IVA. Do you think they may give me other options when they have worded the clause like this?

The debtor will introduce a lump sum estimated at £32,000 after the second year of the arrangement, being the proceed of the remortgage of (my home). Failure to introduce these funds within the period will constitute a breach of the arrangement that cannot be remedied.

Pre IVA worry and panic is starting to set in again.

Thanks for any advice.

I would have a chat with the IP and see what he suggests. Althouwording of that clause is pretty final you could still seek a variation to remove the clause after you can demonstrate that equity release has been refused. As a compromise I would suggest (painful as it is) that an extra 12 months payments be added in lieu. Be aware, though, that this HMRC Condition could be in addition to the normal equity release provisions which could see 12 months extra anyway ---- so the "HMRC 12 months would be in addition to that, making it a potentially 7 year IVA.

[Lisa Thomas]

I suspect this was HMRC's way of giving you time to realise the equity in the property. i.e they agreed to the IVA but their goal was always that you would need to sell the house or come up with 3rd party funds to keep it within 2 years.

I doubt they will be prepared to modify it unless they are going to get something in return.

I suspect their reason for the original modification probably related to significant equity that creditors could receive if the house was sold in Bankruptcy and perhaps the estimate dividend in BKY was high?

[davejack]

Thanks for your reply Lisa and Foggy,

Now I am scared! I suppose there is nothing I can do until I find out if I can re-mortgage. My intention was to do everything in my power to repay as much as I can. If the re-mortgage is refused I will just have to put my faith in my IP to fight my corner and hopefully allow me to pay extra years.

[Shaun Vickery]

In my experience HMRC do tend to impose such clauses, in the evident proviso that, if you are unable to release equity from the property, they may then expect you to sell. I do have concerns over how realistic an expectation this is otherwise; it may allow you 24 months to raise the £32k but if, as may be the case, you are unable to raise this amount from a remortgage of your property, I'm not sure how else you are realistically expected to achieve it. I couldn't say at this stage whether it is possible but ultimately it does leave you at the mercy of lenders' criteria which you have no control over.

[Lisa Thomas]

What was your original intention when you agreed to the modification, how did you think you would achieve it?

[davejack]

When I took out the IVA, HMRC initially rejected it then came back with this modification. I was just so relieved and without really knowing the difficulties I would face in getting a re-mortgage agreed to the proposal. Now, 2 years down the line and after reading this forum I feel my options are now limited without a remortgage. I am meeting with the mortgage broker at the start of May and will see where we go from there. I am not in a position to get help from family or friends. Will HMRC just flat out fail the IVA or will they give me options? I have never missed any payments for my IVA or the lifetime of my mortgage.

[Shaun Vickery]

Just make sure you are speaking to a Mortgage Adviser with specialism in this area, anyone lacking the experience will most definitely be out of their depth!

[Lisa Thomas]

Speak To Shaun aout remortgage options.

I can't see why HMRC would remove this without something in exchange when they put it in in the first place, otherwise what would have been the point of them original putting it in?

What does your IP think?

Do you have any third parties who could give you a lump sum equal to your share of equity?

[redboxtree]

I'm sorry but this was a known issue as I was coming out of my IVA a couple of years ago - and if I knew about it your IP should have as well.

HMRC started introducing this as an artificial way of enforcing a mid agreement review that effectively shortened the life of some IVA's.

With previous cases the wording is what it states - that figure has to be found even if means you have to sell and the as a consequence anything released as a consequence is available to all creditors.

This is something that HMRC introduced to maximise on returns.

[davejack]

I have now been in contact with a reputable local mortgage broker and he is willing to see if he can help me. I was probably being naive as I have never had any experience with IVAs and just thought at the 2 year point I could remortgage, pay them the money and continue on. So many lessons learned in the past few years. I just hope it all doesn't come crashing down on me and I lose my home. By the sounds of it HMRC will not give me any options if I can't re-mortgage.

[jame$bear]

Hi davejack. How are you getting on, a couple of months later? I've just entered into an IVA, HMRC is my main creditor too. My mod was 85% equity release in month 36. The IVA comp I used said that they had a few cases where HMRC had said "funds to the value of the equity" (i.e. 100%). I was given the impression I was lucky.

Anyway - just wondered if you were having any joy with your re-mortgage...