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BBLS breach of terms - what to do as accountant

What liabilities as accountants do we have for clients who take out BBLS but breach conditions?

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OK - I'm sure this will create a lot of responses...

So I, like I'm sure many of you, have some clients, who, entirely without advice or discussion or consultation of any sort (have I covered my back enough...??) took out bounce back loans, and then promptly paid  money out to themselves, either over time, or quite quickly - basically treating the business loan a bit like a personal loan doing what I would consider squarely putting themselves in breach of the loan conditions.

Compasionately, many of these people were desperate during a difficult time, but none-the-less they used the funds in ways that I think they probably should not have - we are talking contractor type companies - the clients in question are, shall we say, a bit unsophisticated financially.

What is the general view of this behaviour? How should it be accounted for in the accounts - a  breach of conditions potentially leading to a breach of government grant - that would basically mean a provision for the interest as the government would not owe it, and classify the whole loan as current? It doesn't seem to quite do it justice though.

The above is just a purely accounting perspective.

How are you all advising clients. Clearly the funds are either dividends or directors loan which will be subject to all the normal things (s455, BIK, distributable profits etc). The risk obviously crystalises if there is a default, in which case it would likely end up in the hands of an IP. But what about before then? Before it gets to a bad position

The funds need to be repaid and my clients are being told this. There is no question there.

What is the risk to accountants. If there was fraud on the application that we know nothing about, are we still aiding and abetting? Is this a possible AML matter (I should probably ask the ICAEW)?

I would be really interested to hear what other accountants. This must be really common - I can't be the only accountant starting to see these things come through.

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By OldParkAcct
19th Mar 2021 19:06

Would have thought that initially you need to give the client an opportunity to make amends and repay the loan.
If they don’t and you think they have applied for the loan fraudulently then guess the only route is making a SAR and ceasing to act.

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Replying to OldParkAcct:
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By bernard michael
20th Mar 2021 10:08

Quote:

Would have thought that initially you need to give the client an opportunity to make amends and repay the loan.
If they don’t and you think they have applied for the loan fraudulently then guess the only route is making a SAR and ceasing to act.

Is "think" enough evidence for a SAR rather than "know" ??

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Replying to bernard michael:
Stepurhan
By stepurhan
20th Mar 2021 10:24

Yes, and it always have been.

An SAR is required if you know, or suspect, or have reasonable grounds for knowing or suspecting that a money laundering offence has taken place.

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By OldParkAcct
20th Mar 2021 12:19

We obviously will not know for a while, but one of my friends who is an IP is fairly certain that the government will be looking to recover any guarantee payments under BBLS OR CBILS from anyone who may have a liability for a fraudulent application. Top of the list will be the directors but next in line will be accountants and the banks.

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Replying to OldParkAcct:
Stepurhan
By stepurhan
21st Mar 2021 11:42

Are you saying that accountants need to be pro-active about making SARs to cover themselves?

To the best of my knowledge, accountants could not apply on their clients' behalf. That being the case, I cannot see how they could be chased for guarantee payments. Only the banks and directors would be on the hook for false applications.

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By Hugo Fair
21st Mar 2021 12:46

Whilst I, of course, agree with your point about accountants not being able to apply on their clients' behalf ... there is the possibility of a dodgy accountant 'cooking the books' to support a claim (made by the client).
I know that this won't apply to readers of this site (and only to a VERY tiny number of accountants overall) ... but it IS in line with HMRC thinking where Agents are not seen as enforcers of compliance but as enablers of avoidance (which to my mind is a sub-set of compliance but to HMRC is indistinguishable from evasion)!
This mindset has a tendency to cloud the judgement of the powers that be when deciding what to do next (even if neither logically nor morally justifiable).

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Replying to Hugo Fair:
Stepurhan
By stepurhan
21st Mar 2021 15:57

Interesting point. As you say, some dishonest "accountants" out there.

I wonder how they would go about proving that an accountant cooked the books. Unless the accountant was stupid in some way (e.g. e-mail saying "Here are those dodgy accounts for the loan application") it would be quite hard for HMRC to prove. An accountant could deny creating dodgy entries or claim to have believed a client's information they only later discovered to be suspect (honest, guv!)

Not that I am discounting the possibility of dodgy types being that stupid. There is plenty of precedent on that.

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By New To Accountancy
21st Mar 2021 19:39

My boss is a dodgy accountant (I walked out of this job nearly 1.5 years ago). He would do two calculations,one 'honest' set and one 'but if we do this' set. He always thought I was not listening, but I was. My boss always asked me to send the returns to the client and I always wondered why, but he's the boss so I'd do what I was told. He'd say 'just say you did the return because if they know I'm in, they'll come to the office and I'm really busy' so I did, as I understood that. Then once I was in the kitchen and I heard him saying 'I've asked the trainee to send it to you, if they ever look into it, it looks like she's done it and although you'll have to pay the tax, the penalty won't be as high as it wasn't deliberate'.
That is how my boss 'cooked the books'. The clients knew exactly why I was sending it,it was me that didn't know all along.
I often think of what else I've been part of without knowing.

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Replying to New To Accountancy:
Stepurhan
By stepurhan
21st Mar 2021 22:17

I think your boss was not as clever as he thought he was.

If you were a junior, it is extremely unlikely that anyone would believe you were preparing returns from scratch. Even if they did, if the return was clearly wrong, then the taxpayer would still be in the frame for signing it off.

Perhaps I am giving HMRC investigations too much credit here.

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By New To Accountancy
22nd Mar 2021 11:52

There were no investigations when I worked there, but I hope I am contacted if there ever is any that 'I' did, I doubt it though.

Clients never signed anything, my boss said this is the best way to frighten clients away.

There was no LoEs, nothing signed, invoices were 'counted' by how heavy the bag they came in etc.

Probably one of the worst practices to exist. I left a very successful job in Finance to join their too.
The shop front looked so professional, you'd never know the truth.

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Replying to OldParkAcct:
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By Paul Crowley
21st Mar 2021 18:24

So glad that banks made it so easy that I helped no clients in the application process

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