Bounce Back Loan while Claiming Universial Credit as Self Employed

paulwl

Hi All
Need I little advice and a bit confused. 
As I was a newly self employed I didn't qualify for any of the other schemes, eg the grants, as I had no income I went onto Universal Credit. 
my question is if I applied and got a Bounce back loan of say £4000, would I have to declare it as income for UC, I am a bit confused as UC are saying yes but my accountant is saying no as its a business loan so its not classed as income. I was only going to apply for amount that would cover my business costs from March and then for 4 months only and not any for any personal withdraws, as I have UC for that. any advice would be welcome 
Thank You

Spotnpaul

I don't think the BBL is counted as capital or savings, there's a comment on the MSE Corona UC guide.
Would like this to be confirmed in more detail if anyone has any info? 
Read a comment somewhere (can't find it now) that UC had told the contributor that the BBL would count as savings/Capital, and if it pushed them above £6000, then would affect UC claim?? 
Thanks.

Jeremy535897

People at UC have also said claimants should treat rental income received as income, when this is manifestly wrong. You cannot take their telephone remarks as gospel. The practical solution I would suggest is to disregard it, but explain in the journal, but I have never claimed universal credit and would welcome comments from posters more familiar with the mechanics than I am.

calcotti

My instinct is that the Bounce Back loan is business capital and should be disregarded but I am not aware of any guidance on this.

gwc1

Taken from LITRG.org

How do I work out my profits for universal credit?

Updated on 20 April 2020

Actual receipts are not defined in legislation but DWP guidance gives examples of the following items which are receipts:

• Any payments for goods and services provided – cash, cheque and credit card payments received in return for goods and services
• Earnings payable abroad – money that is due to be paid to a business in a country outside the UK should be included when it is received by the business
• Personal drawings – if personal drawings have been deducted from the amount shown as an actual receipt, the amount should be added back in
• Sale of certain business assets – where the purchase of an asset has been deducted as an expense in any assessment period and in a later assessment period it is sold or ceased to be used in the business the proceeds of the sale (or the market value if it is ceased to be used) are to be treated as a receipt in the subsequent assessment period. Where only part of the expense was allowable (part business/part personal) the same percentage will be used when calculating the amount of receipt when the item is sold
• Tips and gratuities – where received in response to the service being provided, these should be included as actual receipts but not where they are made as a gift on personal grounds and unconnected to the self-employment
• Payments in kind – DWP will decide an equivalent monetary value to include in the actual receipts
• Any VAT receipts
• Refund or repayment of income tax or National Insurance contributions relating to the trade, profession or vocation.

Capital receipts do not form part of the actual receipts of the business. For example, funds introduced by the owner of the business in order to finance the business or loan capital borrowed from third parties for financing purposes should not be counted as actual receipts.

calcotti

Great reference, thanks gwc1.

I can see that this is based on Advice to Decision Makers H4 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/878191/admh4.pdf. I forgot to check this earlier. There is a specific clause dealing with loans.

H4190 Capital receipts do not form part of the actual receipts of the business. For example,

1. funds introduced by the owner of the business for the purposes of financing

the business and

2. loan capital borrowed from third parties for financing purposes.

JakeMM

Effectively, this would be no different to getting a personal credit card while
on UC. 

The only thing I’m not sure about is whether you’d be able to claim business expenses if you’re paying it with the loan? 

If you have £1000 in sales, but £500 in costs and you clear that £500 with a bounce back loan - does that mean your income is £1000? Would it depend if you pocketed that extra £500 or moved it to back to your business account to replenish the loan amount.

gwc1

Whether or not it’s added in the change of circumstances on your claim is another matter, also if you draw down from the loan for personal reasons or wages is open for ambiguity.

It seems a grey area and possibly damned if you do damned if you don’t!

gwc1

JakeMM said:

Effectively, this would be no different to getting a personal credit card while
on UC. 

The only thing I’m not sure about is whether you’d be able to claim business expenses if you’re paying it with the loan? 

If you have £1000 in sales, but £500 in costs and you clear that £500 with a bounce back loan - does that mean your income is £1000? Would it depend if you pocketed that extra £500 or moved it to back to your business account to replenish the loan amount.

I see your logic but we’re talking business loan to ‘ bounce back’ the business not personal credit cards.
If there’s no payments to be made within 12 months hopefully things will return to normal 🙏 however you can early repay the loan at any given point at any amount.
Hurdles to jump for now