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Has anybody had any BBL defaulters yet?

Old client rang me - their Bounce Back Loan repayments start next month (£700) and they're skint!

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In a nutshell... I'm just totally gobsmacked and I wondered if anyone else has experienced this yet... an old client rang me out of the blue yesterday... he'd taken out a Bounce Back Loan last year... the repayments start next month... and he says he's going to struggle to pay the funds (at £700 pm) as his limited company is basically not trading. He said he got hit my ir35 rules, so his clients are paying him (the individual) and not dealing with limited company one man bands.... So I calculate he's taken out a loan of around £40k (I only set up his accounts system for him on Freeagent last year as a one-off) so I know from memory that I doubt he was in the £160k turnover bracket... He says 'the form asked for a sales estimate, so I put £175k'... 

It gets worse because when pressed, he couldn't really tell me where the £43,000 loan had gone... but he did say he bought a car for £4k and still had £17k cash sitting in the bank... I suggested talking to the bank and maybe stretching out the 6-year loan to 10 years... This would bring the repayments down to £500 per month... he's asking me - 'What'll happen if I default?' I said 'No idea - speak to your bank'. It's 55 minutes of my life I'll never get back. I'm just rather cheesed off at the lack of any checks these banks did when just handing out these loans. I've since read that about 43% of people have no intention (or never had an intention) of repaying the money!!! And I just want to know... has anyone else come across anything like this yet? And if an avalanch of businesses collapse this year (which I totally expect) as repayments start to kick in ...  Are some of these Directors going to get done for lying on the application form and basically defrauding the tax payer and going on a spending spree???

My question is -  when these companies go into liquidation owing the banks Bounce Back Loan money... what happens next ?? 

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By David Ex
15th Jul 2021 15:07

ShakingMyHead wrote:

My question is -  when these companies go into liquidation owing the banks Bounce Back Loan money... what happens next ?? 

Taxpayers presumably step in? Were these not government backed?

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By Justin Bryant
15th Jul 2021 15:18

Quelle surprise (what else would you expect with simple, self-certified company loans for £1o,000s with practically no basic checks?). I can almost guarantee that nothing adverse will happen to this chap if he simply does SBP re his bust company (or just simply walks away from it and allows CH to strike it off).

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Replying to Justin Bryant:
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By sanjay100
15th Jul 2021 18:17

Just too many cases and each case will take months if not years to investigate. Prosecution is pointless for anyone who has no assets.

Possibly there may go after the criminal gangs that have take multiple loans but they are probably somewhere sunny abroad. I would think most of these hoodlums who were brazen to storm Wembley would not hesitate to take a bounceback loan and then boast to their mates. Those how it works one does and the whole others follow. Same for Bounce back loans. Society is broken as there is no respect for rules or authority and there is no deterrent.

If I was a burglar, I wouldn't actually bother burgle people's house I would just get a bounceback loan. More money and less effort.

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Replying to sanjay100:
RLI
By lionofludesch
15th Jul 2021 23:41

sanjay100 wrote:

Just too many cases and each case will take months if not years to investigate. Prosecution is pointless for anyone who has no assets.

Why would a lack of assets protect anyone from criminal charges?

And what would those criminal charges be? Fraud would be difficult to prove in the majority of cases.

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By lesley.barnes
15th Jul 2021 15:22

I can't find any Govt guidence to the banks on this but would the banks not have to follow their normal debt chasing process, official receivers etc. Whilst the company offers some shelter the administrators would be looking at the use if the loan, for example did it become a directors loan. Only at the end would the Governement reimburse the banks. I can't imagine it being as simple as lender defaults - bank passes loan to government - government pays up. Your client might need to read the small print on his loan agreement if it was a CBIL some banks made the director(s) responsible if the company failed.

I found this on a business recovery website, but I can't find any Government paper to back it up. "The Government and the banks have talked about establishing a panel of debt collection agencies that would all follow an agreed code of practice. This is because lenders can only claim on the Government 100-per-cent guarantee once a debt collection agency has exhausted chasing repayment."

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Replying to lesley.barnes:
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By Justin Bryant
15th Jul 2021 15:33

Everyone here would love it if you were right about all that, but in practice none of that is gonna happen to this chap per my above comment, assuming it's a typical dodgy BBL (since it's the company's debt, so an IP would have to be involved re IA 1986 etc. (not just a plain vanilla debt collector) and it's probably not cost effective for <£50k amounts and there aren't enough IPs in the UK anyway to chase all these dodgy BBLs even if it was cost effective).

That said, it's all been good news for the car and property market etc. I suppose.

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By Crouchy
15th Jul 2021 15:32

if anyone has taken the loan, pocketed the cash perosnally and thinks they'll walk away scott free they are mistaken

Yes the loans are government backed, but thats the last resort, many may find themselves repaying loans personally, being disbarred from being a director and facing criminal proceedings first

its not just the banks, we've seen a few client's manage to get their companies closed under a ds01 application who had loans owing and have had the best profits in years due to all the support they claimed

hopefully when the dust settles, company directors will need to pass a fit and proper test before being appointed, we'd also like to see the voluntary disolution need to be backed up with a professional certification that the company is genuinely not needed, has filed final accounts and tax returns and given creditors the option to collect whats owed to them.....will obviously only work if companies house enforce it properly

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Replying to Crouchy:
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By Justin Bryant
15th Jul 2021 15:42

I regret to say that you're the one who's mistaken about all that. It takes years to train anyone to do any kind of job like an IP and there simply ain't nearly enough of them.

I bet the crooks could not believe their luck.

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
15th Jul 2021 16:36

"My question is - when these companies go into liquidation owing the banks Bounce Back Loan money... what happens next ?? "

We will investigate whether the directors have committed fraud in the original application and report them for it and will also pursue them for repayment if they have taken any money out themselves...

More detail explained here (Yes, I have a face for radio and a voice for newspaper but may be helpful if you re having trouble sleeping!):

https://youtu.be/HNV3l4GnDnA

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Replying to Insolvency Practitioner:
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By AdamMurphy
15th Jul 2021 16:59

Don't put yourself down, that was a good video!

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Replying to Insolvency Practitioner:
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By Jo Nokes
15th Jul 2021 17:09

That's all well and good, but will the banks be able to put a stop to an application from a director to get the company struck off. I am assuming that a DS01 might be filed without acknowledging the existence of the BBL, and also that companies house cannot possibly police this. And who is actually paying the IP, assuming he gets appointed in the first place, and given the fact that there may be no assets to be recovered?

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Replying to Jo Nokes:
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By Hugo Fair
15th Jul 2021 21:48

As reported on another thread a couple of weeks ago ... banks (or at least most of them) have set up a simple system that:
a) checks every day for new DS01 applications; and
b) cross-checks these with their loan books.
A low cost, non-technological, solution that works.
The first 'rash' of objections to DS01s have already started hitting Co's House.

And BTW there are assets to be recovered in far more cases than you might think (excepting fraudsters who've fled overseas taking everything with them) - see the new powers being given to Insolvency practitioners and the many situations in which they have the right to chase the current/ex-director's assets.

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Replying to Insolvency Practitioner:
Stepurhan
By stepurhan
15th Jul 2021 17:32

That was most informative, thank you for sharing.

Nothing wrong with your voice or face. The only comment I would make on that front is that you might be better off having your camera higher so you can face it straight on. The angle you had would be less flattering for anyone.

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Replying to stepurhan:
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By I'msorryIhaven'taclue
16th Jul 2021 09:24

I'd echo that; it's always awful seeing yourself on video - yours truly was horrified at the amount of nervous scratching that went on in his first ever - but you presented well, albeit from an unflattering angle. (And why were you so determined to include the potted tree in the shot?)

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Replying to I'msorryIhaven'taclue:
Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
16th Jul 2021 09:35

Just trying to prove that despite being an IP, I don't kill everything off...;-)

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Replying to Insolvency Practitioner:
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By I'msorryIhaven'taclue
16th Jul 2021 11:36

Heh heh!

I was waiting for you to say "This video is sponsored by So-and-so Garden Centre..."

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Glenn Martin
By Glenn Martin
15th Jul 2021 17:25

If he has £17000 in the bank why cannot he not start paying the £700 per month.

The paperwork I have seen from my IP pal is that the they are to pursue these loans quite hard if they have been used as a DLA, and so they should. I believe the banks can only reclaim on the Gov guarentee as last resort, and Banks will object to strike offs for companies with loans.

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Glenn Martin
By Glenn Martin
15th Jul 2021 17:25

If he has £17000 in the bank why cannot he not start paying the £700 per month.

The paperwork I have seen from my IP pal is that the they are to pursue these loans quite hard if they have been used as a DLA, and so they should. I believe the banks can only reclaim on the Gov guarentee as last resort, and Banks will object to strike offs for companies with loans.

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By AdamMurphy
15th Jul 2021 17:39

A now-ex client of mine who took out a BBL, took it all as DLA then went personally bankrupt has resigned from his company as director, when I checked today. He was the sole director, so how does that work?!
The notice to strike off is suspended, though this was prior to his resignation.

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Stepurhan
By stepurhan
15th Jul 2021 17:54

I am slightly less pessimistic than Justin Bryant, but I think he has very good points.

The fact is that there are a limited number of Insolvency Practictitioners in the country. They could easily be overwhelmed in the coming months, leaving many companies to slip through the gap.

I am hoping that the worst offenders will be caught and I think it will be worth pursuing some cases as examples. The sums in individual cases would not typically be worth the cost of action, but if doing so reduces the number of defaulters overall, then the amount at stake from a handful of actions could really make it worthwhile.

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By Hugo Fair
15th Jul 2021 20:29

It may not sound relevant but there's a hidden (or rather ignored) problem with OP's client ... where it says "He said he got hit by ir35 rules, so his clients are paying him (the individual) and not dealing with limited company one man bands."

IMHO that doesn't make sense. The end-user clients should either be paying him direct as an employee ... OR paying his company (assuming that is the body with which they've contracted), albeit having treated him as a 'deemed employee' and therefore processed the pay through PAYE/RTI.

If he truly now is an employee of his 'client' then he should have the employment contract to support that status ... and his company's income stream will dry up (but, as others have pointed out, it must stop paying him ahead of its borrowing liabilities so bang goes the £17k).
Whereas if his relationship with the end-user client truly falls under IR35, then it is his personal income stream that will come to a halt ... and his company can pay not only the £17k but 'his' monthly earnings to reduce the loan (whilst he starves)!

Either way it's a mess, but it's important to ascertain both how OP's client's client is processing/paying for his work (and indeed how they should be if this is different).

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By lesley.barnes
16th Jul 2021 09:14

www.insolvencydirect.bis.gov.uk/IESdatabase/viewdisqualdetail.asp?courtn...

This story appeared in our local paper today about a Director being disqualified for 11 years for fraudently claiming a BB loan.

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Replying to lesley.barnes:
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By I'msorryIhaven'taclue
16th Jul 2021 09:54

That's interesting Lesley, but it makes you wonder whether an 11 year disqualification will be the end of the matter. Misfeasance? Wrongful Trading? Fraudulent, perhaps?

And where are the criminal charges? You see bookkeepers and administrators being jailed for helping themselves to those sort of amounts.

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Replying to I'msorryIhaven'taclue:
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By lesley.barnes
16th Jul 2021 10:27

You hope that they are made liable for the missing money but I fear in this case Justine might be right and nothing else will happen. An eleven year disqualification in reality is a slap on the wrist if you've got £50k stashed somewhere unknown. I noticed that the company had been a compulsory strike off in November 2020 and then restored by the court in June 2021 and as the bank was the major creditor I can only guess it was the bank that followed through.

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Replying to lesley.barnes:
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By Justin Bryant
16th Jul 2021 11:35

You're of course 100% right. I can almost guarantee nothing else adverse will happen to this chap and 11 years disqualification is a very minor wrist slap for this brazen, fraudulent (not to mention very predictable) theft of £50k taxpayer money and he will be well pleased he has trousered this £50k so easily I expect and in fact he's possibly kicking himself for not having had other companies kicking around to repeat exactly the same trick.

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By I'msorryIhaven'taclue
16th Jul 2021 10:20

So a family member has (yet again!) been in touch to ask, nay beg, that I act for them. (The answer's always going to be a resounding NO, even when the cajoling and begging progresses to the tears and then tantrums stages).

They've a £40k BBL and received £20k in grants. Their accountant's just presented their company with a £20k s455 tax bill, so we can assume they've chowed through the entire £60k themselves. There's a £30k car, and some high living; and credit cards cleared.

The £20k s455 bill will clear out their bank account and leave the company on its uppers. BBL repayments due to commence in September.

So there you have it, OP: not quite defaulted yet, but about to come Autumn. I suspect there are many many businesses in such similar dire circumstances.

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Replying to I'msorryIhaven'taclue:
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By sanjay100
16th Jul 2021 10:59

Unfortunately it puts us accountants in a very difficult position, some accountants only get to know the true position when they received the books then have to deal with the headache of S.455/P11d, possible in fraudulent cases disengage and submit a SAR. With the extravagant family member would you have a duty to raise a SAR ?

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Replying to sanjay100:
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By I'msorryIhaven'taclue
16th Jul 2021 11:22

Hi Sanjay,

Well they're with a reputable practice in their town, and since I only have the headlines and not the detail I'll leave any SAR decision to them. Same reason, I guess, for my not reporting our window cleaner for stuffing the cash into his pocket.

Technical query: is one really supposed to disengage in fraudulent cases? The advice used to be to carry on acting for such a client, but to deny having submitted a SAR if asked directly by the client (ie to lie). Wouldn't disengagement serve to heighten a client's suspicions that he had been reported (ie an unintended form of tipping-off)?

From a practical aspect, if a client (albeit an errant client who might have committed fraud) is automatically disengaged by accountants how will that client ever achieve professional representation?

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Replying to I'msorryIhaven'taclue:
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By Jo Nokes
16th Jul 2021 11:45

Hasn’t that always been a problem? If, for example, a client refuses to make correction to a wrongly declared vat return, ( something significant, anyway) you were supposed to resign (according to the ICAEW), and then disclose this when the next advisor wrote to enquire if there were any reasons he needed to consider before accepting the engagement. That could make life difficult for the client.

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Replying to Jo Nokes:
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By I'msorryIhaven'taclue
16th Jul 2021 11:54

Yes, it would certainly make life difficult for the client until such time as he puts the matter right.

But in order to put matters right, he needs to appoint an accountant. And if that accountant is going to resign as soon as he gets wind of a problem...

Anyone else see the Catch-22 flaw?

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Replying to I'msorryIhaven'taclue:
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By sanjay100
17th Jul 2021 21:46

Your points are valid and something that never occurred to me as the client as ou rightly say may end up knowing about who tipped them off but I keep seeing posts as soon as the client does something naughty - the general consensus is to resign and issue a SAR.

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Replying to sanjay100:
paddle steamer
By DJKL
17th Jul 2021 22:05

Only if the client refuses to correct the prior errors.

You are perfectly able to act for clients who have been naughty if they are now prepared to come clean and correct. What you cannot do is merely ignore their past transgressions even if they occurred prior to your appointment and you have only recently become aware of same.

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