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Bounceback loan moral dilemma

What to do if it isn't really needed

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One of my clients has just told me they have applied for and received £50k under the bounceback scheme.

At today they have some £500k in the bank and don't need it but he said (he is in construction) "all my friends/suppliers have had one so i did in case i need it when the recession kicks in and the loans won't be around forever they will change teh scheme very soon"

 I can "sort of" see his logic but is it right? Technically he has been impacted by the Coronavirus as he shut down on 25th March but has now restarted so is eligible. BUT is it right? Would it be right for say a law firm or accountancy practice to claim one and cite "drop off in house completions so fees down" or "i am doing work for my clients FOC who are in need" and then say you are eligible?

This client asked me why i hadn't claimed one as it is cheap/free money - i said i didn't feel it was right. His response was "you will regret it - you will never get the chance for cheap money again - enjoy it while it lasts"

Have others had clients taking advantage when not needed and what do we feel about this??

 

Replies (30)

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By pauld
19th May 2020 11:05

If I had 500k not sure I see the point of taking on some debt. Looks like company unlikely to go bust so will have to start repaying after 12 months. Govt have backed them 100% to make them more easily accessible as banks were not playing ball with interruption loans. I expect there will be a considerable amount of fraud though because so easy to get.

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By Duggimon
19th May 2020 11:07

I can't help but feel with everything going on right now this is very far down the list of things to worry about.

Has he lied in his application? It doesn't sound like he has had to, ergo he qualifies for the scheme.

The only issue you seem to be having is with who you think the scheme should be for, which is not the same as who the scheme actually is for.

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By memyself-eye
19th May 2020 11:36

He can always pay it back next year- the issue is should it have been awarded in the first place?

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By Crouchy
19th May 2020 12:14

Surely the moral dilemma is your clients and not yours

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By codling
19th May 2020 12:25

I spoke with a client yesterday who is in the construction industry and who advised that 2 businesses known to him had borrowed the maximum £50,000 and were going to invest the money in premium bonds etc for a year and then repay the loans. They do not need the loan money to keep the business running as they still have a substantial amount in the pot. They have been affected by Covid-19 so justified in applying for the loan but what about morally?

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Replying to codling:
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By Southwestbeancounter
19th May 2020 14:04

As others have said that's really a question for the lenders not for the accountants as we have many more pressing things to be worried about at the moment

Provided it's not fraudulent then surely the moral aspect is the clients issue not ours?

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Replying to codling:
7om
By Tom 7000
22nd May 2020 11:56

S455 tax and interest charged or benefit in kind charge...watch out... unless s/e

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By ireallyshouldknowthisbut
19th May 2020 13:40

The rules are very loose, assuing they meet them, I am not sure of the issue.

It seems eminently sensible myself to borrow money for future cash flow uncertainties.

indeed we have been advising some clients take them out "just in case" as suppliers and customer will no doubt be going bust around Xmas time when the support is some months behind and things are stretched.

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Replying to ireallyshouldknowthisbut:
Oaklea
By Chris.Mann
19th May 2020 14:02

"It seems eminently sensible myself to borrow money for future cash flow uncertainties".

Couldn't agree more. This time last year, did anyone really have a clue that none of us would be spending the Summer, in Benidorm?

Heavens, this present situation simply proves that absolutely nothing in life, is certain. Live for the moment.

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Replying to ireallyshouldknowthisbut:
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By Rgab1947
22nd May 2020 09:59

ireallyshouldknowthisbut wrote:

It seems eminently sensible myself to borrow money for future cash flow uncertainties.

Exactly!

Yes some will take the p*ss but who knows what the next 12 months brings. Our Chancellor has already warned is about a severe recession, slow recovery and the Gov borrowing is eye watering.

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Replying to ireallyshouldknowthisbut:
blue sheep
By NH
22nd May 2020 10:08

indeed we have been advising some clients take them out "just in case" as suppliers and customer will no doubt be going bust around Xmas time when the support is some months behind and things are stretched.

[/quote]
Yes agree totally, I have been telling clients this is a once in a lifetime opportunity, I very much doubt you will ever get such cheap money so easily ever again, grab it while you can (although adding the various caveats as to it usage)

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By John R
19th May 2020 17:30

Quote from British Business Bank FAQs re Bounce Back Loans:
"What can I use the loan for?

The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes. "

So intending to put the money into Premium Bonds could presumably make it a fraudulent application (but I am not a lawyer!).

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Replying to John R:
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By Southwestbeancounter
19th May 2020 17:47

Yes, definitely if not in the business name!

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By bernard michael
20th May 2020 09:37

I have a client who borrowed £20000. He is putting it into Premium Bonds and paying it back in 12 months time hoping to be lucky in the meantime.What's not to like ??

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Replying to bernard michael:
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By AdShawBPR
22nd May 2020 09:22

I guess if any PB winnings are given back to the company, that might be OK on the basis these funds are being held on trust for the company. If they're kept for personal gain, that sounds wrong and I'd feel uneasy with this.

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Replying to bernard michael:
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By Wanderer
22nd May 2020 09:29

bernard michael wrote:

What's not to like ??

BIK? S455? Disclosure in accounts?
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Replying to Wanderer:
By Duggimon
22nd May 2020 09:31

Possibly not a company?

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Replying to Duggimon:
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By Wanderer
22nd May 2020 10:27

Yes aware of that, that's why my possible 'not to likes' have question marks after them. As often is the case, insufficient information.

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By CW2012
22nd May 2020 09:26

Just about every business I speak to is taking a bounce back loan, some probably dont need it but will look for some way of earning interest on it and then paying it back in a years time, most will have a use for it. The ones that worry me are the disreputable businesses who will draw the maximum they can and pay directors salaries etc and go bust without paying back a penny, there'll be a fair few of these.

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Replying to CW2012:
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By johnjenkins
22nd May 2020 09:57

From the comments it appears that the business world is not in as bad a shape than the doom and gloomers would have us believe.
I have 276 clients, most of which are in the construction industry. Many have been working all through lockdown and the rest have started last week and some this coming week. I'm not sure if this is replicated throughout the country, but if it is then there will be money to spend on clothes and meals when shops and restaurants open again, which I think will be first week in June. (taking into consideration we don't have an upsurge of the R factor).

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By Fiona Woodman
22nd May 2020 10:27

As I understand it it is not really free as you have to pay back the arrangement fee that the government pays at the start of the loan?

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By NYB
22nd May 2020 10:47

Have a client who openly admits that when required to pay it back he will bin the company. And his son is doing the same. Bank doesnt care - they are being picked up 100%. CJRS - directors claiming the £2500 oer month with 4 million in bank, No its morally not right. But there are always those who will milk the system

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By joya2727
22nd May 2020 10:58

Surely, someone applying for a £50k BBL must be VAT registered. I have heard many non-VAT clients going for the full whack. I just wonder, is there any mechanism for the bank to make any checks before actioning the loan? More interestingly, some directors (I heard) are even applying for their dormant companies.

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Replying to joya2727:
Kitten
By Hazel Accounts
22nd May 2020 12:16

Loan is supposed to be for max of 25% turnover so, yes for £50k you must have £200k turnover and usually VAT registered (there are a few activities that may be exempt). For dormant Company 25% of NIL should be NIL available! No idea what checks banks do but as most are through bank with your current business account surely they can check rough income from bank receipts? If not checked now then I hope that somewhere later down the line anyone who took too much would be personally liable and can't hide behind Limited Liability if they default.

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Replying to Hazel Accounts:
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By johnjenkins
22nd May 2020 13:25

I would think that because of the stink banks got over the previous loan system they don't bother checking the nitty gritty.
After reading all these posts I decided to see if I could get 25% of turnover as a bounce back loan. Easy peasy. Had I gone through with it I would have the money within 6 days.

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By AWebbie
22nd May 2020 11:03

I suggest that so long as the client does not behave fraudulently, then the accountant should not be applying his own moral take on the position. The Treasury are not daft. They will be well aware that not all the loans will be immediately needed. But in economic terms "dropping money from a helicopter", which is what this scheme is, provides a useful stimulus to the economy -- and that is probably justification enough in the face of a recession. On the other hand, if fraud is involved then there is the obligation to report to SOCA

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Replying to AWebbie:
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By CW2012
22nd May 2020 11:13

I heard of a CBIL application with the intention of buying rental property, the business was entirely unrelated to the residential letting sector, come on this is just milking the system, the comparison with the war spirit doesn't stack up for me, I've seen too many businesses trying to lever a few bob out of it, morally its wrong and these will be the first directors to decry any tax increases when it comes to pay back

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By Dowland
22nd May 2020 12:31

If we suspect the client has "abused the assistance" then do our professional bodies not require us to make a report to the NCA?
I appeciate some of the contributions here may be heresay, rather than fact but surely we all need to consider the AML aspects.

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Replying to Dowland:
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By bernard michael
22nd May 2020 13:14

Dowland wrote:

If we suspect the client has "abused the assistance" then do our professional bodies not require us to make a report to the NCA?
I appeciate some of the contributions here may be heresay, rather than fact but surely we all need to consider the AML aspects.

The answer is not to be suspicious

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By pauljohnston
24th May 2020 10:20

"It seems eminently sensible myself to borrow money for future cash flow uncertainties".

I could not agree more.I have no idea what the future brings and dont want to explaining to my staff that I did not take up the loan so now have to make you redundant.

If you are with Barclays you may have not got it yet because they are still in a mess

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