IVAs save family home

How twin IVAs kept a couple in their family home when their pub and restaurant business failed.

The situation

Mr and Mrs J were under pressure from HM Revenue & Customs (HMRC) about a build up of VAT and PAYE debt from their unincorporated pub and restaurant business. While the couple had agreed an informal payment plan with HMRC, a bank error meant a payment was missed and bankruptcy petitions had been issued against them. It was at this point they came to see Ranjit Bajjon, a partner at Atherton Bailey's Crawley and Worthing offices.

What we did

A variety of formal and informal insolvency options were explored. To realise the value of the leasehold, the business needed to continue trading before it could be sold to repay creditors. The only option which was acceptable to HMRC, the main creditor, and would allow trading to continue was interlinking
individual voluntary arrangements (IVAs).

In negotiating the IVAs, HMRC took a hard line and stipulated that the pub business and the couple's holiday home in France should be sold within 12 months. If not, they would be required to be sold at auction and the family home also sold for the benefit of creditors.

With extensive negotiation, Ranjit Bajjon persuaded HMRC to allow the IVAs to proceed and the bankruptcy petition was withdrawn. The business continued and monthly £2,000 contributions were paid into the IVAs for two years. Although the timeframe for the sale of the business and French property was exceeded, HMRC was persuaded to allow the business to continue operating to achieve an orderly sale and in the interim to make the monthly contributions.

The result

With the ultimate sale of the business and the French property, the net result for creditors was about 70p in the pound (after HMRC also obtained capital gains tax). Mr and Mrs J retained possession of their home and the business realised a goodwill premium and was continued by the incoming tenant.