Call Us

Business Individual Voluntary Arrangements

A Business Individual Voluntary Arrangement (IVA) is a legal agreement reached between an individual to make regular monthly payments on outstanding business and personal debts combined.

Payments usually last about five years with CCJs, bailiffs and creditor actions all stopped once the arrangement is in place. It’s a good alternative to bankruptcy when looking to protect assets such as your home.

An additional advantage of a Business IVA is that unlike a consumer IVA, it can be tailored to your business debts allowing you to only pay back what you can afford.

What is a Business Individual Voluntary Arrangement?

A Business Individual Voluntary Arrangement (IVA) uses the same legislation as consumer IVAs (that is, an IVA based around personal debt such as credit cards, as opposed to personal and business debt combined).

However, a well formulated business IVA won’t follow the one-size-fits-all approach of a consumer IVA, but will be tailored to your business and personal circumstances.

Many aspects of how we deal with business IVA are a mirror of our approach to company voluntary arrangements (CVAs).

Essentially, our approach is to gain a more detailed understanding of your company and to propose a flexible approach to monthly contributions that provide a considerably higher chance of your business IVA reaching a successful conclusion.

What are your financial options?

Although there are tax accounting differences between a sole traders and limited companies, the largest difference you’re likely to encounter is if the business has financial worries.

A limited company is legally separate from its owners, and has a larger selection of formal insolvency options available to it; all of these have no immediate effect on its directors or shareholders personally.

For a sole trader, however, in the eyes of UK company law, personal assets and liabilities are treated the same as business assets and liabilities. This means that any business debt is personally owed, and is recoverable from personal assets.

Options for sole traders in financial trouble

Formal insolvency options

There are two formal insolvency options available to sole traders:

  • Bankruptcy: if you are planning on continuing to run a business, it is usually best to avoid bankruptcy. Bankruptcy places restrictions upon your ability to trade as a sole trader, whilst also prohibiting you from acting as a director.
  • Business IVA: IVAs are legally binding on all creditors, and as long as you make sure you stick to the arrangement, an IVA will protect you from bankruptcy and further legal action. IVAs usually last for 5 years. Depending on how much you owe, and how much you can afford to pay back, there may be a reduction in the amount you have to repay.

Informal insolvency options

There are also two informal options, which operate in a similar way to the corporate options of the same name. Follow the links for more information on each:

Time to pay arrangements, and informal arrangements are a less expensive way of reaching agreement with creditors. They are not legally binding, but if used correctly, they can be just as effective as IVAs.

In general, informal arrangements are better suited where there are lower numbers of creditors, and repayment will be made in a shorter space of time (normally less than two years).

Am I a sole trader?

A sole trader is defined as an individual business owner who by definition owns all business profits after tax, and is also personally liable for all debts.

Whilst it is easier to set up a business as a sole trader, working for yourself in this way means that unlike a limited company, you do not have the protection of limited liability.

How does a business IVA work?

Although we find that most people seeking advice for voluntary arrangements for do so in relation to their businesses debt, regular IVA proposals must be based around all debt in their name.

The proposal is normally based around a flexible monthly contribution payable for 5 years.

What information do we need from you? Initially, we’ll ask you to collate information relating to:

  • Your creditors
  • Your business assets including an estimate of value
  • Business management accounts (where available)
  • Financial projections
  • Self-assessment returns
  • Financial agreements and leases

From that information, we’ll work with you to prepare proposals for your arrangement. These are forwarded to your creditors and a meeting of creditors is called.

How much will I have to pay into my business IVA?

The level of monthly contribution you pay into your business IVA will be based upon:

  • Business financial projections
  • Other household income
  • Your personal outgoings

We prefer to make your contributions fit around your businesses requirements, so if you run a seasonal business your monthly amount will vary throughout the year. For example, we would expect a garden centre to pay a lower monthly amount in the winter. In general, however:

  • Most business IVAs are set to last for 60 months, though this can be altered to suit circumstances
  • You’re likely to be able to continue to use any required business assets for your on-going trade

What are the benefits of a business IVA?

  • A business IVA can help you avoid bankruptcy. Sometimes bankruptcy can be a better option, but where you have assets to protect, and a company to trade, a business IVA can work better.
  • It will freeze interest and charges on your debts.
  • It will stop legal actions from continuing. If CCJs are mounting up, or bailiffs are at the door, a business IVA can deal with all of these problems, and leave you to concentrate on your business.
  • You may pay back less than you owe. The business IVA is set so that you pay back what you can afford over a set period. This may mean that your creditors agree to receive back less than they are owed.
  • HMRC liabilities are included within the business IVA
  • It will improve cashflow. Rather than paying back amounts you can’t afford to whoever is pushing you the hardest, the business IVA will set at an affordable level that is flexible around your business’ needs.
  • It is legally binding on all creditors. Once agreed at the creditors meeting, and business IVA is binding on all your creditors.

If you have any questions, don’t hesitate to contact us directly.

Next steps…

As we’ve mentioned, as a sole trader, if your business becomes insolvent you will be personally liable for all its debts. This means that assets such your home will be at risk.

Ultimately, there is no separation between business and personal in relation to sole trader debts. At an early stage of debt problems, any adverse credit will be filed against your name personally.

This can have a much greater, negative impact on your personal finances, where mortgages or even home rental applications are concerned, for example.

Business IVAs, time to pay arrangements, and informal arrangements offer three quite different ways for a sole trader to restructure their debts. All of these options take account of business debt, but some also include unsecured personal debt, such as credit cards too.

Whichever one suits you best will depend on your level of debt, and your future plans.

Frequently Asked Questions about Business Individual Voluntary Arrangements
How long does a business IVA last?

A business IVA can last as long as seven years but is usually completed after five years.

Can creditors ask for repayment in a business IVA?


Once a business IVA is agreed and entered into, all interest and charges on debts are frozen and creditors cannot make demands for repayment during an IVA period.

Can I keep my home and car if I enter a business IVA?

Anyone entering into a business IVA will have more protection over their assets including their home and vehicles and may not be forced to sell to repay creditors.

Will my credit rating be affected?

Yes. An individual’s credit rating will be affected by the IVA but it can be built up once completed by showing that they can stick to an agreed repayment schedule although will depend on individual circumstances.

How much will I have to pay?

The amount will vary depending on your assets, the amount you owe, whether you are operating a business as a sole trader and other factors.

Getting in touch with the Expert…

This field is for validation purposes and should be left unchanged.

We use third-party cookies to personalise content and analyse site traffic.

Learn more