Inland Revenue - Statutory Demand


D

Doug Ramage

The brother of one my clients has been served with a Statutory Demand for
income tax arrears plus interest. This is to be followed by a Bankruptcy
Petition.

He asked me for my comments and advice.

I have had made a preliminary review of the tax claimed, and there *seem* to
be a few errors. Am I correct in thinking that, if the SD is incorrect, then
that is a valid reason to have it set aside?

I have spoken to the IR who say that, as the remaining arrears (assuming my
figures to be correct) are still above £750, then the Bankruptcy Petition
can go ahead, and the SD will be amended to reflect my figures in due
course.

Is the IR correct?
 
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D

Dave

spamdoug- said:
The brother of one my clients has been served with a Statutory Demand for
income tax arrears plus interest. This is to be followed by a Bankruptcy
Petition.

He asked me for my comments and advice.

I have had made a preliminary review of the tax claimed, and there *seem* to
be a few errors. Am I correct in thinking that, if the SD is incorrect, then
that is a valid reason to have it set aside?

I have spoken to the IR who say that, as the remaining arrears (assuming my
figures to be correct) are still above £750, then the Bankruptcy Petition
can go ahead, and the SD will be amended to reflect my figures in due
course.

Is the IR correct?
I'd say so Doug from my experience.
As they say, they'll just amend the final figure due.

He should either pay the amount you've calculated before the time's up,
agree a repayment schedule, or go into bankruptcy (although an IVA would
most likely be preferable).

Cheers,
Dave
 
J

John Pointon

Doug said:
The brother of one my clients has been served with a Statutory Demand for
income tax arrears plus interest. This is to be followed by a Bankruptcy
Petition.

He asked me for my comments and advice.

I have had made a preliminary review of the tax claimed, and there *seem* to
be a few errors. Am I correct in thinking that, if the SD is incorrect, then
that is a valid reason to have it set aside?

I have spoken to the IR who say that, as the remaining arrears (assuming my
figures to be correct) are still above £750, then the Bankruptcy Petition
can go ahead, and the SD will be amended to reflect my figures in due
course.

Is the IR correct?
Both of you may be correct.

If the statutory demand is based on a judgment debt, there is no scope
to challenge it. That opportunity lapsed when judgment was given in the
Revenue's favour unless you propose attempting to have judgment set
aside which would only succeed if there were extremely good reasons why
the full facts were not initially established.

If the statutory demand is based on an alleged debt you may challenge
it by applying to have it set aside on the basis that the figures are
incorrect. Your application would be successful and no petition could be
brought on the basis of that particular demand. However, the Revenue
would merely ascertain the correct figures and begin the process all
over again..

If nothing is done about the demand, the Revenue will proceed to apply
to the court that a bankruptcy order be made. Even at this late stage,
you can challenge the application on the basis that the figures are
incorrect. This will give you approximately 6-8 weeks to agree figures
as the District Judge or Registrar will grant an adjournment of the
petition hearing to enable this to be done. However, at the next hearing
he will expect you not only to have achieved this but also to have
agreed with the Revenue upon payment or, failing that, that steps are
being undertaken to put the necessary finance in place eg second
mortgage, loans from friends, business associates etc. Otherwise the
order will be made.


John Pointon
Accountant, Tax Consultant
"In business to grow your business"
 
D

Doug Ramage

John Pointon said:
Both of you may be correct.

If the statutory demand is based on a judgment debt, there is no scope
to challenge it. That opportunity lapsed when judgment was given in the
Revenue's favour unless you propose attempting to have judgment set
aside which would only succeed if there were extremely good reasons why
the full facts were not initially established.

If the statutory demand is based on an alleged debt you may challenge
it by applying to have it set aside on the basis that the figures are
incorrect. Your application would be successful and no petition could be
brought on the basis of that particular demand. However, the Revenue
would merely ascertain the correct figures and begin the process all
over again..

If nothing is done about the demand, the Revenue will proceed to apply
to the court that a bankruptcy order be made. Even at this late stage,
you can challenge the application on the basis that the figures are
incorrect. This will give you approximately 6-8 weeks to agree figures
as the District Judge or Registrar will grant an adjournment of the
petition hearing to enable this to be done. However, at the next hearing
he will expect you not only to have achieved this but also to have
agreed with the Revenue upon payment or, failing that, that steps are
being undertaken to put the necessary finance in place eg second
mortgage, loans from friends, business associates etc. Otherwise the
order will be made.


John Pointon
Accountant, Tax Consultant
"In business to grow your business"
Thanks for your input, John.

The SD is not based upon a judgement debt. I realise that it is really just
delaying the matter, as the final figure is over the £750 bankruptcy limit.
 
J

John Pointon

Doug said:
Thanks for your input, John.

The SD is not based upon a judgement debt. I realise that it is really just
delaying the matter, as the final figure is over the £750 bankruptcy limit.

Any time, Doug.

Just as a timing matter, the Revenue will usually go for a petition
approximately 9 months after issuing the SD. The y can then argue that
even after this period of time they have not been paid and are,
therefore, unlikely ever to be paid. Do not be mislead by the apparent
lack of action into thinking that Worthing have forgotten about it!


John Pointon
Accountant, Tax Consultant
"In business to grow your business"
 
D

Doug Ramage

John Pointon said:
Any time, Doug.

Just as a timing matter, the Revenue will usually go for a petition
approximately 9 months after issuing the SD. The y can then argue that
even after this period of time they have not been paid and are,
therefore, unlikely ever to be paid. Do not be mislead by the apparent
lack of action into thinking that Worthing have forgotten about it!


John Pointon
Accountant, Tax Consultant
"In business to grow your business"
I realise that. I spoke to Worthing this morning, and the papers are about
to be sent to the Solicitor's dept any time now. :(
 
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B

Benedict White

Doug said:
I realise that. I spoke to Worthing this morning, and the papers are about
to be sent to the Solicitor's dept any time now. :(
Has he not thought of making some offer of instalments?

Does this work with the IR?

I am not a lawyer

Kind regards
 
D

Doug Ramage

Benedict White said:
Has he not thought of making some offer of instalments?

Does this work with the IR?

I am not a lawyer

Kind regards
Yes, I am hoping to negotiate an instalment deal, once the final figure is
agreed.
 
J

John Pointon

Doug said:
Yes, I am hoping to negotiate an instalment deal, once the final figure is
agreed.
What are his other obligations - mortgage, hire purchase, car finance,
loans, credit cards etc?

Depending on their size an IVA may be preferable - the revenue will have
to accede if they are a minority creditor.



John Pointon
Accountant, Tax Consultant
"In business to grow your business"
 
D

Doug Ramage

John Pointon said:
What are his other obligations - mortgage, hire purchase, car finance,
loans, credit cards etc?

Depending on their size an IVA may be preferable - the revenue will have
to accede if they are a minority creditor.



John Pointon
Accountant, Tax Consultant
"In business to grow your business"
Although the IR may not the biggest creditor, I think they are more than
25%, which means they could prevent an IVA.
 
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A

Andrew McGee

Doug Ramage said:
The brother of one my clients has been served with a Statutory Demand for
income tax arrears plus interest. This is to be followed by a Bankruptcy
Petition.

He asked me for my comments and advice.

I have had made a preliminary review of the tax claimed, and there *seem* to
be a few errors. Am I correct in thinking that, if the SD is incorrect, then
that is a valid reason to have it set aside?

I have spoken to the IR who say that, as the remaining arrears (assuming my
figures to be correct) are still above £750, then the Bankruptcy Petition
can go ahead, and the SD will be amended to reflect my figures in due
course.

Is the IR correct?
Yes - it's no good saying that the figure is only £49k and they've claimed
£50k. That will not get it set aside. There is a decision to the contrary by
Hoffmann J. in the very early days of the 1986 Act, but it is not noiw
followed - I have successfully resisted the set aside of SD's in these
circumstances.

Andrew McGee
 
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