Clarity from the Government on Directors Loan Accounts and Bounce Back Loans

Clarity from the Government on Directors Loan Accounts and Bounce Back Loans

The Government is making its position crystal clear on a number of issues that could affect many Directors of SME businesses.

The Government has released two Fact Sheets, both on 31 March 2022 that leave no doubt as to how Bounce Back Loans and Director Loan Accounts should be treated.

Directors Loan Accounts

The Directors Loan Account Fact Sheet can be found via the link

Fact sheet: Director’s loan accounts – GOV.UK (www.gov.uk)

The Fact Sheet emphasises the need for Directors to keep accurate records of their dealings with their own companies and specifically highlights payments to Directors for cash withdrawals and personal expenses as being loans.  It also makes it clear that a loan to a Director is any money taken out “that isn’t a salary, a dividend or an expense repayment”.

The Government’s message is simple “the money you borrow still belongs to the company and has to be paid back, even following insolvency”.

Bounce Back Loans

This Fact Sheet is emphasising the Government’s policy to investigate and pursue fraudulent loan applications and misuse of BBL funds.

Fact sheet: Bounce Back loans – GOV.UK (www.gov.uk)

The Fact Sheet cites examples of Directors behaviour that will be targeted and investigated including:

• Providing false information on the loan application
• The loan being used for the personal benefit of Directors
• Dissolving a company to avoid repaying the loan

The inclusion of case studies is an indication of how serious the Government is taking these issues.

We Can Help

We can review and analyse the use of BBL loan funds in detail and can explain to you and your clients any areas of concern that we might discover.  The pandemic threw up some extreme challenges for Directors and understanding the position at that time and the background to decisions taken by Directors can be very important.

We can also look at Director Loan Accounts and explain how these might be dealt with in a liquidation scenario.

These guidelines will help clarify exactly what the position is with these two key topics in the event a company enters a formal insolvency process.

If you would like to discuss any of the issues we have raised here, then please contact Matt or Andy .