Over the past two weeks HMRC have announced that they have made mistakes when calculating the tax payments of millions of people. As a result over 1.5 million people will now have a tax bill. The tax office has said that they plan to take any money owed directly from wages at the rate of c£100 a month.

Losing this amount of money from your income will make things extremely difficult under normal circumstances. However if you are in an Individual Voluntary Arrangement (IVA) it could be disastrous as it will mean that you are unable to keep up with your agreed payments.

Can you add a new Tax Bill to your existing IVA?

If you receive a letter from HMRC stating that you owe tax you should inform your insolvency practitioner (IP) straight away. It is possible that this debt can just be added to your IVA.

If the new debt is less than 10% of the debt currently included in the arrangement your IP can simply add the debt. In most cases it is likely that a new tax bill will fall into this category. If the debt is larger your IP might have to get the agreement of the other creditors to add it by requesting a formal variation.

BMD Tip: Generally your creditors will agree to a variation of your IVA if the reason for the change is not your fault. However it is possible that you will have to extend the length of the arrangement to compensate them. The extension will normally be no more than 12 months extra payments.

Should you start an IVA if you get a Tax Bill?

If you are not already in an IVA but are struggling with your debts a letter informing you that you now have to repay tax arrears as well could be the last straw. If this is the case, you should consider the possibility of starting an IVA. This solution could be the answer to resolving your debt problems once and for all.

You can include all of your unsecured debt in the arrangement including any tax arrears. The payments you make are reduced down to a single affordable payment each month and after paying for five years any debt which is still outstanding is written off.

Your IVA should not be at risk if you get a new Tax Bill

If you are in an IVA and receive a letter saying that you owe tax you do not have to simply struggle to save money from your budget and continue making your payments. The extra tax debt can be included in your IVA

Handled properly there is no reason for your payments to be at risk or for you to suffer with trying to save extra money each month. The most important thing is to speak to your IP straight away.