Ltd furlough..not affected by virus?

**Lance** · 16 July 2020, 07:06

Originally posted by plod2 View Post

Hello,

This is my first post here and was just hoping for a little advice..
I was previously working as a contractor through my limited company for 2 years, but was out of contract as of November 2019. As I had profits retained within the company, I continued to pay myself through PAYE while searching for contracts and developing my skills.

Come March 2020, I had not found a contract yet and the business had not generated any money, I entered the furlough scheme and have been claiming each month since then. However, my accountant is recommending that I do not make claims - saying that I have not been affected by the virus. Yet I believe Covid is a main reason why I was struggling to find a new contract or generate revenue for the business. Am I correct to continue claiming here?

Thanks in advance!

Yes.

Have you been affected? Well.... do you think you would have been more likely to find a contract without Covid? If the answer is yes then you've been affected. Take a bounce back loan as well. £50k of money that your company owes the government. If you pay yourself enough salary to live on (no divis) then you can use the BBL after the furlough scheme runs dry. Then if you still cannot find work, close the company and get a permie job.

**jamesbrown** · 16 July 2020, 07:19

Originally posted by Lance View Post

Then if you still cannot find work, close the company and get a permie job.

You missed the bit about paying back the (up to) 50k BBL, some of which probably disappeared in tax. Can’t close the company until that is done.

**jamesbrown** · 16 July 2020, 07:20

OP: your accountant is wrong. Your use of the scheme is perfectly legitimate, based on what you’ve told us.

**Lance** · 16 July 2020, 07:24

Originally posted by jamesbrown View Post

You missed the bit about paying back the (up to) 50k BBL, some of which probably disappeared in tax. Can’t close the company until that is done.

you sure?
As long as you wind it up when it reaches insolvency, which will be with debts, and as long as you've not taken illegal dividends (hence why salary only), then I'm pretty sure you can. You might be struck off (unlikely) and the company will be bankrupt.
OK. It's not just a close, but you get the point.

**jamesbrown** · 16 July 2020, 07:31

Originally posted by Lance View Post

you sure?
As long as you wind it up when it reaches insolvency, which will be with debts, and as long as you've not taken illegal dividends (hence why salary only), then I'm pretty sure you can. You might be struck off (unlikely) and the company will be bankrupt.
OK. It's not just a close, but you get the point.

Sure about what?

This is a loan. It is not free money. It will not be a voluntary liquidation. The creditors will pursue the debt and might even try to pursue the directors. Sure, banks may be loath to pursue small business owners aggressively in the current circumstances, but a debt is a debt. You cannot simply walk away from it without consequences, neither should you.

**ladymuck** · 16 July 2020, 08:09

On the HSBC BBL page they do state that they will try to recover the funds from you but if they cannot, the government provides a full guarantee.
https://www.business.hsbc.uk/-/media...-factsheet.pdf

I suspect this will be the same for all banks as they are all following the same scheme guidelines.

I wouldn't advocate taking the loan and running off with the money but it's not wrong to try to keep the company afloat using the means available before giving up and liquidating.

**WordIsBond** · 16 July 2020, 08:19

FWIW, BBC is reporting today that the banks are trying to push the recovery issue off onto the government.

Banks urge 'student loans style' plan to avoid job cuts - BBC News

**mjcp** · 16 July 2020, 08:20

Originally posted by ladymuck View Post

On the HSBC BBL page they do state that they will try to recover the funds from you but if they cannot, the government provides a full guarantee.

They may say that they wil try and recover them from you, but they will still need to follow insolvency rules.

From Bounce Back Loan: Understanding personal liability and alternative funding options

"Bounce Back Loans and Personal Guarantees: Understanding your liability

The government is providing 100% security to the banks for loans taken out under the BBLS, however, it is the responsibility of the business to pay back the loan once monthly repayments begin following the initial 12-month grace period.

As the government is providing the banks security for the full loan amount, this means that company directors will not need to provide a personal guarantee to underwrite the borrowing.

Not having to provide a personal guarantee becomes extremely valuable if the company is unable to recover from the impact of Covid-19, or otherwise finds itself in financial distress at a later date. If the company becomes insolvent and subsequently enters a formal insolvency procedure, such as Creditors’ Voluntary Liquidation, then responsibility for repaying the Bounce Back Loan will remain solely with the company and liability cannot and will not be transferred to directors or other shareholders provided they comply with their statutory and fiduciary duties as a director. This means there is no risk to a director’s personal assets or individual credit rating should their company not be in a position to repay the loan."

**Old Greg** · 16 July 2020, 08:31

Originally posted by mjcp View Post

They may say that they wil try and recover them from you, but they will still need to follow insolvency rules.

From Bounce Back Loan: Understanding personal liability and alternative funding options

"Bounce Back Loans and Personal Guarantees: Understanding your liability

The government is providing 100% security to the banks for loans taken out under the BBLS, however, it is the responsibility of the business to pay back the loan once monthly repayments begin following the initial 12-month grace period.

As the government is providing the banks security for the full loan amount, this means that company directors will not need to provide a personal guarantee to underwrite the borrowing.

Not having to provide a personal guarantee becomes extremely valuable if the company is unable to recover from the impact of Covid-19, or otherwise finds itself in financial distress at a later date. If the company becomes insolvent and subsequently enters a formal insolvency procedure, such as Creditors’ Voluntary Liquidation, then responsibility for repaying the Bounce Back Loan will remain solely with the company and liability cannot and will not be transferred to directors or other shareholders provided they comply with their statutory and fiduciary duties as a director. This means there is no risk to a director’s personal assets or individual credit rating should their company not be in a position to repay the loan."

Directors have to exercise some level of caution.

Can company liquidation affect my personal credit rating?

Director responsibilities

As a director, you are bound by certain responsibilities and must always act for the good of the company. Directors of limited companies have little risk (or limited liability) of falling foul of company debts if the business fails. However, you must have acted properly – in accordance with the Companies Act 2006 along with the Insolvency Act 1986.

If you do not act appropriately, or fail to act reasonably and keep proper accounts and records, you may face director’s liabilities. Furthermore, if you continue to take credit knowing the company does not have the resources to make repayments, you are at huge risk of personal liabilities for the company debts. This action is regarded as wrongful trading and, if proven, can put you at very personal risk. More information can be found on wrongful trading here. In short to avoid being accused of wrongful trading you should take steps to deal with the company’s insolvency when it is clear there is no chance of recovery.

If you continue to rack up debt when you have already determined the company will be entering liquidation, it may be classed as fraudulent trading. If found guilty, you could even face imprisonment.

Ltd furlough..not affected by virus?