Sole Trader Debts | Self Employed | Small Business Debt Help

By far the largest group of self employed are the ‘sole traders’. This term is used to describe a business owned and controlled by one individual irrespective of whether there are any employees are not. Most have relatively low turnover,it is quite easy to set up in business as a sole trader and the costs of operation are much less than those of more complicated businesses such as partnerships or limited companies. The main disadvantage is that there is no distinction between the business and the individual and in the event of any liabilities as a result of a failed business, the sole trader stands to lose everything including his personal assets.

When a self employed individual gets into financial difficulties there a number of remedies available to them such as bankruptcy, debt management or an IVA. The IVA legislation was enacted in 1986 primarily aimed at the self employed and was designed to allow viable businesses to continue to trade while returning monies to creditors greater than that available in bankruptcy. The IVA encompasses all unsecured debts such as trade creditors, overdrafts and any HMRC liabilities in addition to any personal liabilities such as loans or credit cards. Not only do the trade creditors and HMRC see a return on their outstanding debts, there is also the possibility of recovering even more as a result of ongoing trading.

HMRC are also very supportive of IVAs where all creditors are treated the same and the proposal is not only viable but the client’s best offer. They do however insist that all outstanding returns due for VAT, PAYE and self assessment are submitted before they will agree to acceptance. Ultimately, HMRC accept that individuals and businesses can get into financial trouble but there is little or no excuse for non submission of statutory returns

If your business has got into financial trouble it is vital to seek help from an insolvency practitioner [IP] as soon as you are aware. Most IPs offer a free no obligation consultation and can put you and your business back on a sound financial footing while protecting your personal assets such as your home.