www.iva.co.uk

Hi,

When I signed my IVA I was a sole trader but now I run a ltd company and have a PAYE set up and am paid the amount from my IVA from the business (of which I am owner and employee). Any additional money is save into the business account to provide liquidity for the business (some up and some down years)...

My question is as long as I dont touch this money in the business account other than business purposes do I need to declare what is in there to my IVA provider when I get reviewed? My concern is that they will want 50% of this to go to the debtors. This is not earnings as they have not gone to my own account as a wage or payment. In the IVA it states any earnings above x amount I would need to pay 50% to the creditors.

If this is the case it makes it very difficult to run a business in a market which is volatile and which I need capital to operate also why work or earn anymore than that set in the IVA if they are going to take 50% off you and then likely hike up the repayment at the review.

Look forward to hearing your comments

Jon

It is fair enough to be allowed to retain profits in your limited company to cover working capital requirements, however if you build up reserves, as a sharedholder of the company, this is money which should be made available to your creditors. Your IP will want to see your limited company accounts each year and can let you know whether they consider any additional funds will require to be paid over.

The reason for the 50% uplift is pretty fair - I am sure when you borrowed the money you did so with the intention to pay it back to the best of your ability. The IVA should be no different.

MelanieGiles wrote:

It is fair enough to be allowed to retain profits in your limited company to cover working capital requirements, however if you build up reserves, as a share holder of the company, this is money which should be made available to your creditors. Your IP will want to see your limited company accounts each year and can let you know whether they consider any additional funds will require to be paid over.

The reason for the 50% uplift is pretty fair - I am sure when you borrowed the money you did so with the intention to pay it back to the best of your ability. The IVA should be no different.

Hi Melanie,

Thanks for the superfast response!

My concern is "what is a good working capital?" who decides that...In my business I could potentially have no work for 6 months or have some equipment break which would cost some serious cash (thousands) to repair and without it I cannot make a £. In that situation I could may not be able to pay the IVA. As such a reserve (not working capital) would be required.

The other issue is they (Creditors/IVA company) may then also ask to increase the IVA monthly repayment if they see I have managed to maintain a reserve? If this is the case it seems I should then only take on enough work to cover my income (rent bills etc) and the IVA as anymore is a risk of me going into default / increase repayment situation. Or I would be doing long hours for no real reason than to give to the creditors. In this case I should spend all working capitol on business expenses for the future when the IVA ends.

If it was a case were I could earn enough addition income above my iva earning threshold to pay off the total debts before the end of the IVA I would be happy to pay extra (50%), but I am not even close.

Jon

It is something you would really need to discuss with your IP, Jon, but most IPs will understand the working capital needs of a business - after all we are all running our own businesses as well (apart from the few IPs who are employees rather than business owners).