How are self-employed/business expenses calculated in an IVA?

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jessharris

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Post by jessharris » Wed Feb 13, 2019 11:01 am
Hi,

How are self-employed/business expenses calculated? I am an online consultant, in digital marketing. My IVA has asked to see my previous bank statements, the problem is it will show a large amount going in and out of my personal account. (I don't have a business account because of IVA).

So let's say I received £5k this month, well £4k are spent or reinvested back in my business, whether its marketing costs, hiring freelancers, paying for online tools. That's not immediately evident on my statement though, because some money I transfer to my friend (who handles payments of my freelancers for me), sometimes I withdraw cash which I then pay directly to my freelancer. How can this not be interpreted as me simply withdrawing cash from the cash machine and spending it? Do I just provide my own receipts that I gave to freelancers of mine?

It also shows that I receive money from other sources, freelancing platforms, stripe etc. As that's how my clients pay me.

How does it treat my online ventures? For example, I start a new website and I spend money on advertising that website in order for it to make money. Can they control how much I spend in my online ventures?

I also get sent money to handle marketing of another website, the money sent is not a salary of any kind, it is literally just enough to pay the freelancers I then hire and direct to do the work for that site (social media, ppv, seo).

Just worried they will simply see the amount and think I'm withholding surplus income.

I'm also abroad at the moment in India as a matter of fact, so the freelancers I'm paying are based in India, it's all pretty much cash in hand stuff.

Thanks

Foggy

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Post by Foggy » Wed Feb 13, 2019 11:27 am
You really need to be having this conversation with prospective IVA providers --- make sure they are experienced with self employed clients, as they also have to account to the fact that your income appears before deduction of tax and NIC.

I would suggest a smaller firm who will listen to your circumstances, rather than the "IVA factories" who will provide an "off the shelf" approach.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
http://foggy.blogs.iva.co.uk

jessharris

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Joined: Wed Feb 13, 2019 10:39 am

Post by jessharris » Wed Feb 13, 2019 11:32 am
Thank you. I’m actually already in an IVA this is for an annual review. I was just wondering because I recently received money which I will just be reinvesting back into my business and I wasn’t sure how they saw that.

Is there a limit to how much you can reinvest if not necessary? I mean if I want to start a new website and business venture online with the additional income I earn, would they see that as money I should be paying to them or business expenses?

Foggy

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Post by Foggy » Wed Feb 13, 2019 11:41 am
jessharris wrote:
Thank you. I’m actually already in an IVA this is for an annual review. I was just wondering because I recently received money which I will just be reinvesting back into my business and I wasn’t sure how they saw that.

Is there a limit to how much you can reinvest if not necessary? I mean if I want to start a new website and business venture online with the additional income I earn, would they see that as money I should be paying to them or business expenses?

There is a lot of IP discretion built into these arrangements and most IP's will have their own criteria for reinvestment. Many would see that starting a new venture is, basically, gambling with creditors money (ie income that should be paid over to them) and some would see it as a possibility to increase future income and, therefore, payments to the IVA. You will have to make your own case.
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
http://foggy.blogs.iva.co.uk

jessharris

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Joined: Wed Feb 13, 2019 10:39 am

Post by jessharris » Wed Feb 13, 2019 11:45 am
Thank you. And with regards to proving that this income is being spent on expenses where it’s hard to prove such as sending the money to friends account who then handles payments for me, cash in hand to freelancers which I basically withdrew from cash machine.

How can I prove that is the case and not be interpreted as simply me withdrawing cash to spend or sending money to friends?

Foggy

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Post by Foggy » Wed Feb 13, 2019 12:13 pm
jessharris wrote:
Thank you. And with regards to proving that this income is being spent on expenses where it’s hard to prove such as sending the money to friends account who then handles payments for me, cash in hand to freelancers which I basically withdrew from cash machine.

How can I prove that is the case and not be interpreted as simply me withdrawing cash to spend or sending money to friends?
Again, with no paper trail, you will have to depend on the IP's discretion and the element of trust. More importantly though --- how are you going to account for these payments to HMRC ? Same issues apply and they are not so trusting !
My opinions are merely that .. opinions based on experience. Always seek professional advice.
IVA Completed 23rd July 2013 .... C.C. 10th January 2014
http://foggy.blogs.iva.co.uk
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