Member Article

Bounce Back Loans add to Winding Up Petition Crisis

INSOLVENCY cases are on the rise…and Bounce Back Loan problems are adding to the crisis, a leading financial expert has warned.

In October, a total of 406 winding up petitions were advertised, with a major high street bank confirming 99 that appeared to relate to non payment of Covid Bounce Back Loans.

In September, a total of 396 were advertised, with the same high street bank suggesting that 99 again appeared to relate to the Bounce Back Loan scheme.

And with the number of winding up petitions for November already standing at 127 in just nine days, Ryan Holdsworth, of Sheffield business turnaround and insolvency practice Graywoods, says all the warning signs are there for the crisis to worsen.

“The increase in winding up petition has mainly been due to a more aggressive approach adopted by HMRC,” Ryan explained.

“In November 2021 the tax debt outstanding stood at £39 billion, in comparison to pre-pandemic levels of £16 billion and as recently as March this year, the Committee of Public Accounts issued a report which criticised HMRC for not having a clear plan on how to tackle the huge level of debt outstanding.

“The rise in winding up petitions, therefore, suggests that HMRC are increasing the use of this tool in their collection strategy.”

At the same time, Ryan added, the fact that one major high street bank was issuing so many winding up petitions suggested that the banking industry was now also looking to take action on outstanding Bounce Back Loans.

“We understand that a number of companies applied for Bounce Back Loans and then, shortly after receiving the funds, applications were made to Companies House for the companies to be dissolved.

“While this worked for a period of time, we have now seen evidence of the Department for Business, Energy and Industrial Strategy and other interested parties objecting to the strike off if there is an outstanding Bounce Back Loan.

“The message to directors has to be to take advice at an early stage to understand what their duties are if they are unable to repay a BBL or other repayment agreements.

“Simply putting the matter to one side will not ultimately solve any problems and there is now evidence to suggest that the bank may petition for the winding up of the company.”

This was posted in Bdaily's Members' News section by John Highfield .