Just over 12 months since the government made their Bounce Back Loans available to companies and the National Audit Office predicts that over 50% of the loans are unlikely to be paid back.
The loans were made available to companies as part of the coronavirus support package for business. The loans were intended to help companies with any cash flow issues they might be experiencing. Loans of up to £50,000 were made available without any “real time” audit processes in place. The lending, administered by the main banks required company directors to self-certify their requirements using and online form. The loans had no interest payments for the first 12 months and importantly, required no collateral guarantees from the companies who took them. They were in effect guaranteed 100% by the government.
We were very sceptical at the time that many of these loans would ever be repaid and so it seems is the National Audit Office (NAO). £46 billion loans were made and the NAO estimates that £26 billion won’t be repaid. That is a colossal giveaway.
The question is who will pay the price? The answer of course if you and me.
We have already been told that we will be footing a big proportion of the bill with increases in Corporation Tax due to take effect next year.
The Treasury has suggested that Insolvency Practitioners will be well placed to identify where company directors have “misappropriated” Bounce Back Loan funds, but will there be any penalties? I can’t image the government issuing civil procedures to recover funds en masse, or even to ban more individuals from becoming company directors in the future. I suspect the £26 billion has gone up in smoke.
There are suggestions that the government overhauls the civil recoveries procedure specifically to deal with these loans, but again I can’t see this happening.
This is not the only misappropriation of funds during the pandemic. Figures are likely to emerge about the number of companies who have claimed Furlough payments under the Coronavirus Job Retention scheme (CJRS) whilst continuing to make staff work through the pandemic. We are aware of several examples of this happening and HMRC have just announced the arrest of a couple in Yorkshire in relation to a £3.4 million CJRS fraud. The tip of the iceberg.
The CJRS has provided over £61 billion in support to companies to date!