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What will HMRC’s position be?

What will HMRC’s position be if my client strikes off his Company when he has a 10k bounce back loan

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What will HMRC’s position be if my client strikes off his Company when he has a 10k bounce back loan and a 9.5K Director’s loan?

He has initially taken a bounce back loan which is somewhat higher than his usual yearly net profit. Not a great start!

You probably understood the correlation between the two figures. Yes, he spent the whole amount for personal purposes (rent, bills, and so on).

I probably need to add here than his business has not been impacted by Covid. It hasn’t even slowed down.

My question is what is HMRC going to do about this? Last time I read about this it said there was no legislation in place at that time, therefore we didn’t know if HMRC would deem this case as fraudulent. Do we know now what HMRC position will be for company Directors who took a loan with the intention of running away with the money and closing the business afterwards?

Thank you very much all in advance if you have any advice for me.

Replies (17)

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paddle steamer
By DJKL
22nd Jan 2021 16:51

Perhaps object to the striking off, what route is your client considering to have the company struck off?

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Replying to DJKL:
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By Cylhia66
22nd Jan 2021 17:28

What would be the benefit to objecting to the striking off?

I'm thinking traiditional route to strike off the company.

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panda ketteringUK
By ketteringUK
22nd Jan 2021 17:23

Not sure if HMRC will care or even notice this. They cannot object to all ds01's applied for.

I would be more interested to know what action the lender will take. My guess is that the lender will object and then what? I haven't got a shlightest idea. Too early days.

We have one similar on the books, currently being furloughed. Council grant, bbl all taken as drawings. DLA nearly £20k overdrawn in the accounts.

At the very least, you should cover yourself with evidencing everything, right disclosures in the accounts, s455 tax applied and possibly looking into sar. So far there are no grounds on reporting but should the person decide to do a runner via ds01 without repaying the loan, it would be our obligation under mlr. Different matter whether something would be done with this report...

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Replying to ketteringUK:
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By Cylhia66
22nd Jan 2021 17:33

Thank you. I'm definitely doing everything to cover myself. I'm not worried about that.
In some ways I feel for this client. His finance management is very poor and he's not in a good place. I wish I could minimise the negative impact of his thoughtless actions.
Knowing what the lender's position is would be a good start. You have a good point.

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By Paul Crowley
22nd Jan 2021 17:29

This will be way under the radar

Justin will be commenting soon and I agree with him before he even comments

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Replying to Paul Crowley:
the sea otter
By memyself-eye
22nd Jan 2021 18:18

Like that - have you got the lottery results eve before they're drawn?

Me neither.

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By Justin Bryant
22nd Jan 2021 17:52

As if HMRC will have the resources to deal with all these dodgy BBL cases (and I think I read somewhere it takes around 18 months just to train their new staff).

At least the boss of HMRC can say he did warn the Government in advance.

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Replying to Justin Bryant:
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By Cylhia66
22nd Jan 2021 17:35

Thanks Justin. That's good to know.

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Replying to Justin Bryant:
A Putey FACA
By Arthur Putey
22nd Jan 2021 18:09

Makes you wonder why they don't outsource it as they have done with elements of debt management. I'm sure Serco, Deloitte or any of the consultancies who get to feed from the government trough would be up for it, they might find a few fraudulent benefits claimants while they are at it.

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Replying to Arthur Putey:
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By Paul Crowley
23rd Jan 2021 10:28

No idea who they outsource the Contruction industry stuff to
But whoever it is cannot operate spreadsheet totals.

Enquiry started on tax deducted by contractor
The tax was right, But their spreadsheet was wrong. All entries present, but only half in the tax total
Total for income was correct though

But this only came out after £1,000 of time wasted

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By Tax Dragon
23rd Jan 2021 07:05

I thought the great post-COVID economic recovery plan of full employment was to recruit 20,000 additional HMRC staff to deal with issues like this - self-funded from the monies recovered.

There's also the question about what is the OP (what are all of us in such cases) going to do? Surely that's more to the point - HMRC will do what HMRC will do, not much point discussing it, issue is what do we do?

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David Winch
By David Winch
23rd Jan 2021 11:52

Part of the OP's question is
"Do we know now what HMRC position will be for company Directors who took a loan with the intention of running away with the money and closing the business afterwards?"
In terms of criminal law (and hence reporting a suspicion of money laundering) the INTENTION is absolutely key. If the loan was applied for (and obtained) with the intention of taking the money out of the company, leaving a correspondingly overdrawn director's loan account, and then dissolving the company (that's a big "if") - then that sounds dishonest to me.
That dishonesty could be prosecuted in terms of, for example, fraudulent trading under s993 Companies Act 2006.
The loaned monies would then be proceeds of crime and the transfer of them to the director, and use of them by the director, would be money laundering offences.
So in that case the accountant would have a reportable suspicion of money laundering.
On the other hand, if a business gets a BBL, and subsequently goes under, and the loan is never repaid - that, of itself, would not give rise to a reportable suspicion.
David

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Replying to davidwinch:
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By Cylhia66
23rd Jan 2021 12:06

Thank you David. That's very helpful

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Replying to davidwinch:
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By Tax Dragon
23rd Jan 2021 17:23

I'm struggling to see how one could take out a loan in a company, withdraw those funds from the company and use them personally without intending to. Even if you didn't intend all three steps initially, if the basis for the loan is that the company needed the money and you went and took the money out (with disastrous consequences for the company - it really did need the money!), are you not culpable?

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Replying to Tax Dragon:
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By Cylhia66
23rd Jan 2021 17:37

I would have thought so.
Now my question is: Would my client at some stage be punished for what he did if he were to strike off his business now?

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Replying to Cylhia66:
paddle steamer
By DJKL
23rd Jan 2021 17:54

Suspect the answer depends how many of these there are.

If I have got things correct the BBLS came via banks, the government effectively did the underwriting, if HMG start getting thousands of notices of default from said banks then pressure might be brought to bear on the lending banks to investigate a bit, I would suspect the agreement between HMG and said banks requires best endeavours by the banks regarding recovery, or something similar.

So if there is a mountain of bad debts for HMG to pay out I would not be surprised if further actions arose later down the line.

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Replying to DJKL:
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By Tax Dragon
23rd Jan 2021 17:58

That would be my thinking too.

So my point in asking what will you do is because you need to be thinking about what you will do.

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