Bounce back loan repayment demand

unholyangel

When OP said the gov website said you could invest, I was curious as I only remembered minimal information on the bounce back loans being available on gov.uk. So I had a look. 

Couldn't find anything on gov.uk but MSE do state they have confirmation from the Treasury:

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. 

Unfortunately, I think OP has perhaps misunderstood investment to mean any investment. 

Jeremy535897

unholyangel said:

When OP said the gov website said you could invest, I was curious as I only remembered minimal information on the bounce back loans being available on gov.uk. So I had a look. 

Couldn't find anything on gov.uk but MSE do state they have confirmation from the Treasury:

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. 

Unfortunately, I think OP has perhaps misunderstood investment to mean any investment. 

Yes, that could well be it. The FAQs say:
"What can I use the loan for?
The business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes."
From: https://www.british-business-bank.co.uk/ourpartners/coronavirus-business-interruption-loan-schemes/bounce-back-loans/faqs-for-small-businesses/

So long as the premium bonds were encashed and any prizes added to the cash returned to the business, insisting on repayment of the BBL seems rather draconian, and I cannot understand how TSB could fail to point out that closing the business account would create such a problem. I am of course assuming the business is a sole trade. If not, I think the position is worse, as the premium bonds would have had to be bought in OP's name, not the company's name. As dunstonh has said, it is time to talk to TSB.

Grumpy_chap

Jeremy535897 said:

So long as the premium bonds were encashed and any prizes added to the cash returned to the business, 

That would negate the tax free status of Premium Bond winnings.
I already put a post above on that matter.

Jeremy535897

Grumpy_chap said:

Jeremy535897 said:

So long as the premium bonds were encashed and any prizes added to the cash returned to the business, 

That would negate the tax free status of Premium Bond winnings.
I already put a post above on that matter.

And it is still wrong. You don't make premium bond prizes taxable by putting them in a sole trader business bank account. Just as a sole trader who pays basic rate tax and earns under £1,000 on savings won't suddenly lose this treatment if some of the interest arises on his sole trader business bank deposit account.

Grumpy_chap

I am keen to understand this.
If an individual wins the PB, that is entirely tax free.
If the same winnings are business assets, surely, that then increases the business profits and become subject to tax.  The details of that tax depends on sole trader or Ltd Co, but business profits will still be taxed.

Jeremy535897

Grumpy_chap said:

I am keen to understand this.
If an individual wins the PB, that is entirely tax free.
If the same winnings are business assets, surely, that then increases the business profits and become subject to tax.  The details of that tax depends on sole trader or Ltd Co, but business profits will still be taxed.

We are assuming a sole trade, not a company, here. Companies can't buy premium bonds, but OP could have a company, and have used its BBL to buy premium bonds in his own name. That would definitely cause a major problem for the BBL, but that is not your question.

When you have a sole trade, you are taxed on the trading profits. Those arise from the trading activities; buying and selling goods or providing services.

At any time the assets in a sole trade belong to the sole trader. How you account for that does not affect matters. You can have a set of business accounts with no bank account in, for example, because the bank account used is a personal one. It might even be a joint account with a partner. From a tax (if not a bank) point of view, it does not matter, except that if there was interest charged on the bank account, you would have to disallow all or part of it, to the extent to which it related to personal expenditure.

You can have an overdrawn business account, and still not be able to claim all the interest, if it is used to finance drawings, and the sole trader has no equity in the business. That is because the business bank account has been used for personal purposes.

The point I am making is that you, as the sole trader, might legitimately regard say, premium bonds, as part of the business, because profits in the business, or borrowings by the business (eg BBLs), have been used to buy them. You might draw up accounts including them as a business asset. From a tax point of view, though, those premium bonds are a personal asset, nothing to do with trading profits, and happen to be exempt under the legislation.

Basically, you cannot recategorise non-trading income as trading income merely by cloaking it in a business shell. If you paid the proceeds of the sale of your main residence into the business bank account, you would not expect to pay income tax on the profit, even if the house was in your accounts as an asset for some reason. A farmer whose business accounts include his farmland does not pay income tax when he sells a field (unless he also trades in or develops land).

warby68

If OP can't repay as requested, I don't think there's much to lose by asking for clemency from TSB and pleading naivety/ignorance with regard to the Business Account and asking for it to be reopened and to start using it. I really suspect the closure of the account is the main issue and possibly the removal of the funds in one lump sum followed by closure, not necessarily the destination of that lump sum, just the suspicious behaviour and no intent to use the account may also suggest no intent to repay the loan either. If OP has something to show the subsequent use by the business, presumably through other accounts it may help.
Bank may be pragmatic if customer demonstrates no other ability to repay other than through continued trading.
Sometimes admitting you were wrong/mistaken can help rather than trying to prove Bank wrong.
I'm curious why you did it though OP - why did you close the business account when it was needed as the repayment vehicle? What were you expecting to happen? Its like cancelling a direct debit, eventually someone will realise you've cancelled the means of repayment. What harm was it doing open? Didn't the rigmarole to get the loan give you a clue?
I'd get an alternative bank account opened first though just in case.

mcplumb

The account needs to remain open to facilitate the 12 month interest free period, which starts straight away. For example my account shows "BBL interest £-52.08" followed by "BBL + £52.08) on the same day so Starling are charging the account the GOV/HMRC are crediting the account on the same day. With no account in place you will default on the payments, depite not having to make any

Thrugelmir

dunstonh said:

You have to look at the options the OP has.  Complain and they may get concessions but they may also draw further attention to the breaches and TSB may dig their heels in and remove their personal banking too.   After all, they were told they needed a bank account once but then totally disregarded it and closed it once they had the money.  So, its difficult to argue that they didn't know the couldnt use the personal account.

TSB would have to be particularly arsey about it but they may feel the OP has been arsey about it too.   

I suspect that with a bit of sensible communication, this could easily be resolved.   

Bottom line is that some customers aren't worth the bother. In business once trust gets broken it's difficult to repair the relationship.