If you spent your bounce back loan on living costs, watch this.
The governing body R3 has recently done a webinar titled: ‘Bounce Back Loans – An essential Guide for an insolvency practitioner‘
One of the questions that arose was:
‘What is the view of the insolvency service on directors using bounce back loan money on a reasonable basis to cover their living costs if they had no other means of income.
Particularly personal services companies’ main day to day expenses have always been for the director’s services in the company?’
Here is their answer:
‘If a director has no other income at all and they used the bounce back loan money to draw reasonable living expenses at a rate similar or lower to that pre-pandemic then it would be difficult to justify taking action. In particular, if using the bounce back loan in this way there was an economic benefit gained from keeping the company afloat (especially a personal services company) it would be a different consideration if the director had spent all the bounce back loan in a few months outstripping previous drawings.’
This will give a large number of contractors a huge sigh of relief.
They do mention that each company would be judged on a case-by-case basis.
Remember you still might have increased your director’s loan account so it is always worth checking first.
I hope you have found this helpful
All the best,