bounce back loan and universal credit

Jeremy535897

stevewright said:

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!

One point I have taken away from the experts is do your figures on how you believe they should be done, but cover yourself by explaining your reasoning in the journal.

stevewright

Jeremy535897 said:

stevewright said:

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!

One point I have taken away from the experts is do your figures on how you believe they should be done, but cover yourself by explaining your reasoning in the journal.

hi Jeremy,

I had explained allot in the journal, including the fact that Universal credit were deeming me as self employed, however in the eyes of HMRC as a limited company im employed by my own company so im therefore not technically self employed- i discussed this at length with them and they had told me that they look at it differently to HMRC, and in their eyes i am self employed (but not gainfully)

For (hopefully the benefit of all) - I spoke to the Universal credit hotline and they have advised that i would not have to declare the loan as its not earnings - hope this helps out anyone else in the same situation

I do still feel though that the whole Universal credit system has never been setup for people such as ourselves when we do need any form of help (first time ive ever required help) - Ive also contacted 2 MP's on the matter who agreed that the system does have its problems

Jeremy535897

stevewright said:

Jeremy535897 said:

stevewright said:

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!

One point I have taken away from the experts is do your figures on how you believe they should be done, but cover yourself by explaining your reasoning in the journal.

hi Jeremy,

I had explained allot in the journal, including the fact that Universal credit were deeming me as self employed, however in the eyes of HMRC as a limited company im employed by my own company so im therefore not technically self employed- i discussed this at length with them and they had told me that they look at it differently to HMRC, and in their eyes i am self employed (but not gainfully)

For (hopefully the benefit of all) - I spoke to the Universal credit hotline and they have advised that i would not have to declare the loan as its not earnings - hope this helps out anyone else in the same situation

I do still feel though that the whole Universal credit system has never been setup for people such as ourselves when we do need any form of help (first time ive ever required help) - Ive also contacted 2 MP's on the matter who agreed that the system does have its problems

It really doesn't make much sense in the context of sole director companies, where they treat them as self employment for UC but not tax.

[Deleted User]

Hi,

Have you found any further advice regarding bounce back loans and it’s effect on UC? 

I’m also thinking of utilising the 0% 12 month offer as a back up whilst the music industry gets back up and running hopefully by 2021. 

Thanks
dave

Jeremy535897

Nothing new to my knowledge.

Spotnpaul

Jeremy535897 said:

Nothing new to my knowledge.

Anyone have the definitive answer to this?
I've (at last) been able to open a business account so will hopefully apply for the BBL -  to use for sorting a vehicle and some training for my business - not a massive amount, likely around 5K. It'll be kept in a business account, and I'll use the business account for my business from now on. Sole trader.
It's looking like I'll need some UC help for while while things pick up, but I don't want the BBL to cancel, or disrupt things.
I'm going to ask in the journal, but anyone have a written in legislation answer ? It all seems a little vague.

Jeremy535897

A sum received by way of loan cannot be regarded as income for UC, because it is not income, and it is not deemed income. There is anecdotal evidence on the forum that decision makers agree. The corresponding cash amount, while kept in a business account and earmarked for business purposes, should be disregarded because it is a business asset. See ADM H2:
"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.  UC Regs 2013, reg 57(3)"

Spotnpaul

Hi,
Thanks. Just had this back from Universal Credit via the journal "the bounce back loan is treated as a business asset that we mark as capital but do not take into consideration when assessing your entitlement."
So, it's been answered for me. I've done the right thing and checked before going ahead.
I'm happy to apply now. See what happens.

Grumpy_chap

Does this make any difference whether the OP is self-employed or Ltd Co Director?
Also, looking at the definition of business assets that Jeremy cited:

Jeremy535897 said:

"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). 

Surely a loan would not create a net asset to the business?  The money received from the bank will be entered as a credit in the business bank account but a liability in the business loan account.  Net impact to the balance sheet is zero.

Jeremy535897

Grumpy_chap said:

Does this make any difference whether the OP is self-employed or Ltd Co Director?
Also, looking at the definition of business assets that Jeremy cited:

Jeremy535897 said:

"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). 

Surely a loan would not create a net asset to the business?  The money received from the bank will be entered as a credit in the business bank account but a liability in the business loan account.  Net impact to the balance sheet is zero.

If only it were that simple...

With UC and self employment you have to look at everything in two different lights. The first is whether the receipt of a BBL is income (obviously it can't be an expense). Money appears in your business bank account just like it does when a customer pays your invoice, and that is income. The answer is that a loan isn't income because you have to pay it back (you'd soon go out of business if you paid all your customers back).

The second is that when income has been sitting in your bank, it becomes capital, so the next question is whether that capital has to be treated as giving rise to deemed income (like having £16,000 in a personal savings account). This particular capital can be disregarded per H2022.

I have said before that UC seems to be a mixture of tax law, company law and accountancy rules designed by a committee containing no tax lawyers, company lawyers, accountants or benefit claimants.