Dealing with sole-trader debt/arrears?

who_me

Hi, I'd appreciate any advice on this, as I'm at my wits' end here.

Short version: is there any way a sole trader can cease trading, that lets him pay Revenue arrears in a sustainable manner? Is there anywhere I can seek professional advice on something like this? Accountant? Solicitor? Financial specialist? Or do I have to just accept I'm screwed and will likely end up losing my home?


Long version: I'm operating as a sole trader, and around 8/9 years ago got into arrears with the Revenue. It was 100% my own fault, nothing dishonest, just naive and panicking on my part. I've spent the years since in belt-tightening mode, trying to keep everyone paid, and things have been slowly but steadily improving, in spite of the recession. My income is higher than it has ever been, as are my tax returns. And I'm clearing my debts one by one. I thought I was about 18 months from being up-to-date, and debt free (bar my mortgage, which hasn't had a missed payment).

Until this year. This year the Revenue seem to be taking more drastic action, more quickly. I understand they have every right to do this, but if they do I'm screwed and have no way of repaying them.

- A Notice of Attachment was put on my account because my income tax payment was 3 months late, effectively locking it. I couldn't even lodge money in, so in fact it delayed my tax payment. Why 3 months late? Because last year's payment was 6 months late, and this year's was far larger. I paid as soon as I had the money to pay it.

- A 10% interest charge on my liability for late payment of the above.

- Immediate payment of my property tax arrears (fair enough, I'd only paid 1 year).

- A 10% surcharge on my liability for late payment of the property tax.

I paid everything, except the last surcharge, which we agreed I'd pay the following month.

- Nope, a 10% interest charge on the surcharge, and demands to pay the surcharge within 7 days, in spite of our correspondence.

- This is in addition to >7,000 euros I'm paying per year in tax arrears.

- To make matters worse, I've just realised that when I was paying my income tax last year (and so massively overdrawn) I missed a couple of the arrears payments. As a result of which, I believe those and all subsequent payments have deemed late and thus invalid. Almost 6,000 euros of payments effectively wiped and having to be repaid. Probably immediately, or all future payments will also be deemed late.

Now, I don't have a snowball's chance of payment my tax payment in October, not even close. In the very best scenario, I don't pay for a few months, get lots of threats, a 10% interest charge and that's it. But that's unlikely, they've been escalating quicker, taking more drastic action, sending more threatening correspondence (didn't think that was possible).

Is there any way I can get out of this, paying my debts in a *sustainable* way. ("Pay 20K in 7 days. No? Pay 25K in 7 days!!" isn't sustainable). I'm happy to cease trading. I'm even thinking if going to jail for a few months would "wipe the slate" then I'd do it. I'd really love to keep my home as it's the only thing I haven't ****ed up in my life. But if it meant an end to the constant threats, fines and penalties, I'd let that go too.

pedronomix

You do not mention any professional advisors you may have used in sorting this, did you use any? Neither do you indicate the scale of your debts or equity in your house or other assets. I suspect if this has been ongoing for the past 6/7 years, you have run out of road with Revenue and you should consult an insolvency professional immediately. It would appear to be far too late for more DIY solutions or amateur advice from posters on here.
The sooner you start to deal with the realities, as they are now, with proper professional guidance, the sooner you will be able to restart your life.

Yeah consult someone who has specialised in revenue debt like this before. Someone that knows the ropes and what exactly your options are.
The other option is to get an appointment with someone in revenue, go in and explain your situation and sell them on your commitment to fix everything, and come up with an agreed schedule of repayments that is possible. If your very transparent about everything and show them your trying your best they might work with you.
If you do manage to fix the situation or find a solution, draw a line in the sand and hire an accountant to manage your tax affairs and make sure everythings paid on time in the future.

pedronomix

I rekon this has gone too far ( attachment orders etc) for the OP to have any chance of sorting it himself, he has lost all credibility with Revenue. IMO, a pro is his only hope!

who_me

Ok, I appreciate the advice. You may well be right that they have lost patience with the situation, though with some leeway I have been making steady progress in terms of income, size of tax returns and the timing of those returns. Hitting someone who's in debt, with additional penalties is absolutely understandable, but ultimately counter-productive. As it stands I'm making large tax returns, if I go under I can't pay anything. I'm not sitting on a pile of assets they can sell off.

For what it's worth, these are my current debts:
- My mortgage, which is up to date (no missed payments). I don't know what the current selling prices are, but I wouldn't imagine there's much equity in it, if any.
- Approx. €19,000 in tax arrears, with monthly payments. As stated above, I've actually paid another 5,000, which may have been invalidated by a couple of missed payments last year (when paying the annual tax bill); I'm attempting to ascertain the cause.
- A credit card bill of < 3,000 euros, which will be cleared by Dec/Jan.

And of course the biggest problem will be the upcoming tax bill.

I'll have a look for insolvency professionals (any recommendations appreciated! Based in Cork if relevant.)

Many thanks.

pedronomix

Revenue will no doubt be delighted that your mortgage is up to date.. at their expense. It is no wonder they are all over you!! Wake up lad!!

antoinolachtnai

You aren't really all that insolvent. A good local accountant who does a good bit of tax should be able to work this out for you. I would suggest you get a recommendation from a local business person.

Don't lose hope, this can be resolved. You do need help though.

Realistically I think you are going to miss some payments on your mortgage here, or at the very least making some interest only payments. You certainly aren't going to be paying back your credit card so you might be able to restructure it as a loan. The Revenue's view (and they have a lot of law to back them up) is that they are supposed to get paid in priority to all of these other people.

Oh yes, don't forget to pay the advisor. This is very important.

But this can all be sorted out. The main thing is to focus on your business. In reality, the only way to solve this problem is for you to generate more cashflow so you can pay your bills. Just remember that. Don't cease trading. No one wants you to do that.

pedronomix

Good advice from antoinolachtnai, you have not been handling matters in the correct order in terms of prioritising payments of the cash that is actually available. You need a change of mindset and the help of someone who actually knows what they are doing and how to achieve a result. You will get a huge burden lifted off your shoulders once you have a proper agreement with your creditors in place, the world will seem a much brighter place.. this is a nice bonus!

jcon1913

Hi OP,

Sorry to be a merchant of doom here but have you considered that your business cant afford you? In other words assuming you are taking a reasonable level of wages / salary whatever from the business, you should be able to afford the tax bill from the business.

Is there anything you can change about your business? Can you increase prices / change activities / change products / get rid of troublesome customers?

Otherwise you will be in the same position next year, and the year after and the year after until you retire. Does that make sense?

This to me is as big an issue as the Revenue bill.

antoinolachtnai

It is a very good point and that could be the problem, but it could equally be that the OP's business requires more capital than it can get from the cashflow. It is difficult in a crisis to distinguish between a solvency problem (fundamentally unsustainable) and a liquidity problem (where you just have a shortage of cash) but that is one of the things the OP needs advice about.

One other thing OP: you could escape this by going bankrupt, but if you only owe nineteen grand and are earning ok money from your existing business, it actually isn't worth your while. It could potentially cost you more to go bankrupt than to just pay your debts. Sounds mad, but it is quite likely true.

jcon1913

antoinolachtnai wrote: »

It is a very good point and that could be the problem, but it could equally be that the OP's business requires more capital than it can get from the cashflow. It is difficult in a crisis to distinguish between a solvency problem (fundamentally unsustainable) and a liquidity problem (where you just have a shortage of cash) but that is one of the things the OP needs advice about.

One other thing OP: you could escape this by going bankrupt, but if you only owe nineteen grand and are earning ok money from your existing business, it actually isn't worth your while. It could potentially cost you more to go bankrupt than to just pay your debts. Sounds mad, but it is quite likely true.

Most micro businesses that have cashflow problems dont make enough to pay the owners drawings. Taxes are paid in arrears so they are paid last. However late payment of tax may be a symptom of an unprofitable business.