Some helpful information if you can’t repay your Bounce Back Loan
Is there a Bounce Back Loan loophole?
There aren’t “loopholes” in the traditional sense. But there are structured solutions within the bounds of the law that could help your repayment challenges.
For limited companies, entering a formal insolvency procedure, such as a Company Voluntary Arrangement (CVA) or Creditors’ Voluntary Liquidation (CVL), can result in the loan being partially written off if there are insufficient company assets to repay it.
If you’re a sole trader, an Individual Voluntary Arrangement (IVA) offers a structured approach to consolidate and reduce debt payments.
What happens to the directors if the company can’t repay its Bounce Back Loan?
If you choose to enter a formal insolvency process, like a CVL, the liquidator is legally obliged to review all activity to see if any of its directors are responsible for its failure. Fortunately, most Bounce Back Loans were used for their intended purpose, and our investigations are able to absolve the company directors of any involvement in causing the insolvency.
How HMRC handles Bounce Back Loan investigations
If there are compliance issues and a company cannot repay its loan, HMRC and lenders are allowed to investigate. The result could be attempts to recover the debt from company directors or owners personally. To mitigate the risk of this:
- maintain accurate records of loan usage.
- communicate proactively with lenders and HMRC if you’re struggling with repayments.
- seek professional advice to ensure you’re managing the situation correctly.
Even in the most challenging circumstances, there are often ways to protect yourself and find a path forward. Seeking advice from a licensed insolvency practitioner is the best way to ensure you’re exploring all viable options, including a Bounce Back Loan write-off where possible.
Can you strike off a company with an unpaid Bounce Back Loan?
In the years after the pandemic, there’s been a rise in directors attempting to strike off their company with debts, including unpaid Bounce Back Loans, in an attempt to avoid repaying them.
To tackle this issue, the Insolvency Service now has enhanced powers to reinstate companies that it believes were struck off improperly, so that they can be further investigated and dishonest directors prosecuted.
Getting a licensed insolvency practitioner involved when you close your insolvent company means that every procedure will be followed, so you can be assured you’ve done everything legally required of you.
