In our dedicated self-employed team, specialists work with individuals to create cash flow budgets to understand their business’ affordability and whether they are making a profit or loss.
Where a self-employed Individual Voluntary Arrangement (IVA) is the right solution, the client will go through to the Bespoke IVA Team. The terms of a Bespoke IVA are the same as a standard arrangement, with the same benefits. The specialist team is experienced at putting together 12-month cash flow projections for the business, and at negotiating with business creditors such as HMRC.
Bespoke IVA Team
PayPlan is the only free debt advice organisation to offer flexible in-house support for self-employed IVAs. In addition to working with the client to understand the business’ affordability, advisers will also support with their tax returns. This is to make sure that the company books are in order as it will help to get the creditors on board to approve an IVA.
A flexible approach
Unlike a standard IVA, a bespoke solution takes into consideration what someone can pay over a 12-month period. This means that repayments can be flexible around peaks and troughs in income and seasonality. These measures provide an achievable solution that works around the individual’s circumstances.
It’s important that people who are self-employed can continue trading while repaying their debts. PayPlan works with trade creditors to keep accounts open; as this is often the only way clients can continue bringing in money for payments.
Unique for buy-to-let clients
Regardless of the size of the individual’s portfolio, PayPlan has a unique system to add individual buy to let properties separately. So, properties are treated as individual businesses and not associated with the household income.
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Having a dedicated self-employed team allows PayPlan clients to have a case worker who is familiar with the intricacies of self-employed clients and the desire to protect their business.
I’m an adviser, how can I help self-employed clients with debt advice?
When working with clients who are self-employed, take a realistic approach to put together an affordable, sustainable repayment to their creditors, while protecting their business.
It is possible for their business to survive, and thrive, while they work their way out of the situation.
Five steps to support clients who are self-employed:
A wide range of people are classed as self-employed, including one person businesses such as taxi drivers, partners in a partnership, Directors of Limited Companies and buy-to-let property owners.
- Encourage your client to act as early as possible
By seeking help early, it’s unlikely your client will be forced into bankruptcy. Instead other options such as an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP) will allow your client to reduce debt payments to an affordable level while protecting their home and business.
- Work out a cash flow projection
Most likely, business and personal income and expenditures aren’t separated, so the true profitability of their business isn’t known.
Business creditors are more likely to accept offers of repayment if they can see a cash flow projection for the next twelve months projecting the business’s income and expenditure. This helps your client understand how profitable their business is and provides them with a useful business budgeting tool.
The net profit of the business can be calculated by deducting the business costs from the business income. After making an allowance for Tax and National Insurance, you’ll see how much they can take from the business to pay their personal living costs. After deducting their personal living costs, the amount left over should be an affordable, sustainable amount to offer their creditors.
- Work out which debts need prioritising
In most cases, all unsecured creditors will be treated equally, however where your client is running a business, they may wish to prioritise some of their unsecured debts. For example, they may need to continue paying suppliers in full to guarantee future supply or perhaps they need an overdraft to pay for business running costs until they get paid.
- Consider how different debt solutions may impact a self-employed client
In bankruptcy, they may have difficulty trading as business assets may be sold and they will also be unable to act as a Director of a Limited Company without leave of the court.
A longer-term plan such as a DMP, where creditors are repaid in full over an extended period of time, may not be appropriate as the tax authorities often require payment in full within 12 months, which may be unachievable.
In an IVA, your client will make reduced payments usually for a five to six-year period. If they stick to the terms of the IVA, the remaining debt will be written off at the end. An IVA may be more suitable as interest and charges are frozen and the creditors included in the IVA are unable to take legal action, if the IVA is accepted.
- Will the client’s income will fluctuate?
Consider whether your client’s income fluctuates, as this may affect whether they can afford a regular fixed payment.
If this is the case, a DMP may not be suitable as creditors usually expect a regular payment. However, payments in an IVA can be flexible, taking into account any seasonal fluctuations.
For example, if your client is a gardener and receives most of their income in summer and not as much in winter, your client can make payments as and when they receive their income, rather that needing to make a payment every month.