What is a Partnership?
If you trade through a Partnership one of the earliest warning signs of financial difficulty is tax arrears. Since H M Revenue & Customs lost their status as preferential creditors they have become much more active in using the Courts and Bailiff’s to take enforcement action to recover unpaid tax. It should be noted that whilst all the Partners are liable for any VAT or PAYE arising from the business of the Partnership, they are not all liable for the income tax liability arising from the profit share of an individual Partner.
Partners Tax Arrears
The situation for Partners is that there is often a problem in paying their own tax which is due in January and July on the profit of their business. This is especially so when the business has traded profitably previously but has now suffered a downturn in trade. In such cases, it can be that monies that have been put aside to pay tax bills has been used to fund the business instead.
Telephone Lines Henry on 0800 012 6649 for free initial advice about how to deal with problems with paying tax .
Partnership Voluntary Arrangements
We have helped many Partnerships to restructure their business and overcome financial problems. This can be by way of an informal arrangement with creditors, or by using a formal insolvency procedure such as a Partnership Voluntary Arrangement (PVA).
A PVA is an arrangement between the Partnership and all of its creditors. It is extremely flexible and can be anything from a short repayment holiday to a full and final settlement of all of the unsecured debts. The method of repayment can be through monthly contributions out of profit, the sale of surplus assets or a one off payment. In some instances third parties (usually friends or relatives) have introduced a lump sum to pay creditors a one off dividend in full and final settlement of creditors’ claims. Whichever route is chosen, it is important that the business itself is fundamentally profitable and able to pay its way going forward even if it cannot pay all of its past debts. A PVA has to be completed through a Licensed Insolvency Practitioner.
For further information and a free consultation contact Lines Henry on 0800 012 6649.
The problem with any insolvent Partnership is that not only is the business affected but the Partners’ individual assets are also at risk. This may result in the Partners proposing an Individual Voluntary Arrangement, as well as the Partnership Voluntary Arrangement. Lines Henry can advise on the best course of action.
The insolvency legislation provides a number of possible solutions for insolvent Partnerships. The Partners can put forward a Partnership Voluntary Arrangement (PVA). This is similar to a Company Voluntary Arrangement (CVA). A Proposal is usually put to the Partnership creditors in full and final settlement of their debt. That Proposal often involves contributions from the Partnership’s trading profits and/or an injection of funds from other sources. These monies are paid into a fund administered by the Licensed Insolvency Practitioner who acts as Supervisor of the Arrangement.
As with all forms of insolvency the sooner advice is sought, the greater the number of options remain that may be available. If you trade in a Partnership and are suffering financial pressure we offer a free initial consultations.