bounce back loan and universal credit

stevewright

Hi, 

I have applied for a bounce back loan as the only option that was available to me to tide me over the coming months, however I have just had a dawning and worrying thought, will this loan now affect my universal credit payments? Bearing in mind that the only reason ive had to take the loan out, is because the universal credit payments have been no where near enough to cover my rent and bills.

Ive parked the full loan amount in a disused business savings account as I only want to dip into it if I have to, but Im now concerned that I will have to put this into my UC earnings and income next month which will reduce everything!

Jeremy535897

The receipt of the loan should not be treated as income for universal credit. If the loan proceeds are kept in a business bank account and the loan is to be used for business purposes (which BBLs are required to be), the cash in the account should be disregarded for universal credit, but it would probably be sensible to explain matters in the journal. Those who know about the mechanics of UC claims can advise better than me.

stevewright

Thanks Jeremy - how the Universal Credit has been set up i believe is incorrect anyway, (despite me telling them this numerous times!) I was told i have to input everything that goes into the account and leaves (not sure until next mth on the exact terminalogy if its money earnt ie income or ingoings and outgoings)

I always would have thought the UC should be based on your personal account not your business account, as this shows what you have earnt or taken out of the company but they disagreed with this

Sibbers123

The bounce back loan shouldn't be used for personal expenditure (i.e. rent)

Spotnpaul

Just guessing, but if you were to use any of the BBL towards daily income (food, bills, holiday etc), then you would declare that as UC income for the period you used it - would that be right?
If you used any of it towards buying a new work vehicle, you wouldn't claim that particular expense against your UC claim for that month?
Does that sound right?

sam8787

Sibbers123 said:

The bounce back loan shouldn't be used for personal expenditure (i.e. rent)

Unless you are a sole trader and then you can use it like wages. As a sole trader you are the business

Spotnpaul

sam8787 said:

Sibbers123 said:

The bounce back loan shouldn't be used for personal expenditure (i.e. rent)

Unless you are a sole trader and then you can use it like wages. As a sole trader you are the business

And if you used it as wages, would this be classed as income for UC?

sam8787

Actually I dont think it will as its a loan

Jeremy535897

Universal credit really isn't designed well for people with self employment. I think advisers at DWP have said you don't treat the BBL as income. The next question is whether the proceeds of the loan when paid into the business account become capital subject to the £6,000 and £16,000 limits. The UC advice to decision makers on business assets, which are disregarded permanently, in ADM H2 says:
"Meaning of business assets
H2022 Business assets include standard items such as machinery, vehicles, fixtures and cash held in the bank (including money held following the sale of assets). They may also include items such as customer lists and contacts, current and future contracts and goodwill.
H2023 In the event of their sale, assets may result in an income or capital receipt. A sale of an asset such as “work in hand” may result in an income receipt and so would be appropriate for inclusion in the profit and loss account. Where doubt exists as to whether a particular asset would represent a capital or income receipt upon its sale, the principles of commercial accounting must be applied i.e. the approach that would be taken by an accountant or the HMRC to such a receipt or holding."

In this context, cash held in the bank is usually taken to be cash in a business, rather than a personal, account, although DWP has said that exceptionally money held in a personal account to fund tax liabilities can be disregarded.

It seems to me that if the cash in the business account is used to pay for business expenses, these are still deducted from any income from the business for universal credit, as normal. The loan is still a liability that will have to be paid off. If the cash in the business account is used to repay the loan, that is not an expense for universal credit. Money spent on living expenses (described earlier as a sole trader's "wage") is not an expense for universal credit. But I have never claimed universal credit, and it would be better if someone familiar with the mechanics of UC were to comment.

stevewright

there was an article by Martin Lewis with the following regarding communication with HMRC on the bounce back loans:

"It has confirmed there are no strict rules on what these loans may be spent on, as long as it is under the banner of working capital or investment – ie, things to keep the lights on, like debt service, bills, running costs and crucially wages. And more so, again it has confirmed you can apply for this loan even if the only reason is to support your income.

I also have  the remainder of my corporation tax liability to pay which ive been chipping into last few months with monthly payments, and have upcoming accountants fees and annual software i need to purchase relevant to my work- i guessthe loan can be used towards these. To be honest, i didnt want to touch it unless i absolutely have to hence why i parked it in a business savings account, hoping i wont have to chip into it and next year i can pay it all back and not commit to the full (fixed) 6 yr payment plan

Im still not clear however on the answers above if its something i need to declare to Universal Credit - i could of course ask them, but going on their history with dealing with business and the self employed i would not be confident in their response!

stevewright

i honestly do not see why universal credit required me to input everything from my business account - surely if i withdraw £100 to pay myself i obviously cannot live on that alone so would need help, and likewise if i took out £10000 its obvious i wouldnt be eligible for universal credit in the first place!