Use of Bounce Back Loans

Use of Bounce Back Loans

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Just had a clients books (H/W Ltd CO) in to prepare accounts to December and noticed that they have taken a BBL, which in itself is ok, but they were also "furloughed" for a short while during the year.

However, they have put £20k into a new Company pension scheme and appear to have had a better year than the one before, upon initial questioniong the client said they had identified a new income stream in the third quarter that they had never tapped into before which entailed the use of sub contractors, which is all backed up by the paroll records. 

They even asked whether there was going to be a second BBL scheme !

I am uncomfortable with this so after having "read the uses" of  BBL etc on the government website I am unsure whether I need to report/sar them or just "Dear John" them .

Thanks

Replies (7)

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RLI
By lionofludesch
27th Jan 2021 10:05

What do you reckon they've done wrong ?

Have they missed any repayments ? What did they tell the bank they were borrowing the money for ? If it was just for something bland, such as working capital, I'm struggling to see a problem here.

I was talking to a fella the other day - not a client - who said he'd got a BBL when they first came out and stuck it in a deposit account, just in case. Given the challenging and unpredictable year we've had, I think that's fine. Sometimes, we need to reset our parameters and criteria.

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By andrew1211
27th Jan 2021 10:24

They had a better year, they put money into a pension......sounds fine to me, nothing says the BBL has been used for the pension.

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ghm
By TaxTeddy
27th Jan 2021 10:29

We're seeing some variations on this question and the use / misuse of bounce back loans.

I have a niggling worry that three years down the line this will have become the next iteration of the 'loan arrangements' fiasco - with HMRC hounding people for the return of the money, plus interest, penalties........

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Replying to TaxTeddy:
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By Paul Crowley
27th Jan 2021 10:40

I really hope so

The abuse is outstanding

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Glenn Martin
By Glenn Martin
27th Jan 2021 10:29

Not sure what your issue is with it. I am assuming he was concerned around level trade when he took out the loan which is to be used for working capital. If he has managed to pick up work later in the year good look to to him.

Remember it is a loan which he can repay before he has to start making payments on it.
Not sure borrowing money to fund a pension is good idea though.

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Replying to Glennzy:
RLI
By lionofludesch
27th Jan 2021 10:33

Glennzy wrote:

Not sure borrowing money to fund a pension is good idea though.

No. Though it depends when he repays it, I suppose.

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Kitten
By Hazel Accounts
28th Jan 2021 11:43

Assuming they answered the questions honestly at the time they took the loan then they don't seem to have done anything wrong.
Hindsight is wonderful but you have to look back at their situation when they took the loan. Like many I have clients who furloughed staff, claimed grants and took BBLs at the outset (work stopped etc) but have subsequently changed direction, business has picked up and so they may well have a good year. Sadly I also have clients where they are still struggling - no one could be sure back at that time which category they would be in.

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