Inland Revenue blamed for most bankrupts

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The taxman really is the biggest cause of people going bust, according to an authoritative survey published today.

Furthermore, the most common bankrupt today is a "married, self-employed man in his mid-forties," says the report, adding that "if you are going to lend money, lend it to a woman."

These conclusions come from the sixth annual Personal Insolvency survey by the Society of Practitioners of Insolvency (SPI), which polls more than 1,600 liquidators and receivers throughout the UK.

The survey confirms what many people may have suspected - that tax and VAT debt was the biggest cause of personal insolvency for self-employed people in 1996.

The SPI research also found that individuals facing financial difficulties find it harder to avoid bankruptcy if their main debt is tax or VAT arrears.

Only about a quarter of self employed people whose main creditor was the Inland Revenue or Customs & Excise entered debt repayment schemes called Individual Voluntary Arrangements (IVAs), alternatives to bankruptcy which leave debtors in business. Bankrupts, however, are not allowed to remain directors and cannot borrow money without the agreement of their trustees in bankruptcy.

Where other debts were the main reason for difficulties, the survey found a far larger 44 per cent entered IVAs.

Brendan Guilfoyle, president of the SPI, is confident that new initiatives should help more self-employed people arrange IVAs in the future.

Mr Guilfoyle said: "SPI, the Inland Revenue and Customs & Excise are working together to ensure that IVA proposals put to the tax bodies are approved as often as possible. There has been a feeling in the past that realistic proposals - which should have given everybody involved a better outcome than bankruptcy - have sometimes been rejected on technicalities."

On average, said Mr Guilfoyle, an IVA gives creditors three times the pay back as a bankruptcy. IVAs only made up 17 per cent of all personal insolvencies last year, and the SPI wants to increase that.

The survey also found that men made up 83 per cent of people who were declared bankrupt, or who had to arrange to pay off debts to avoid that fate last year. Two thirds of them were married and nearly 40 per cent were in their forties.

But women were five times less likely than men to go bust, owed 14 per cent less on average, and were more likely to agree a debt repayment scheme.