Did you use a Bounce Back Loan to cover personal expenses during the pandemic? Act now to avoid tax consequences

If you received a Bounce Back Loan (BBL) during the coronavirus pandemic and took the cash as drawings, there may be additional tax consequences.

Here’s what you need to know.

What is the Bounce Back Loan Scheme?

The Bounce Back Loan Scheme (BBLS) was introduced at the height of the pandemic to support businesses that had lost income as a result of Covid-19 disruption.

The scheme helped small and medium-sized enterprises (SMEs) borrow between £2,000 and up to 25 per cent of their turnover, with the maximum loan capped at £50,000.

The BBLS was withdrawn on 31 March 2021 and replaced by the Recovery Loan Scheme, a new Government-backed finance scheme offering loans of up to £10 million.

What should I do?

If you withdrew a Bounce Back Loan as drawings, you should speak to us well in advance of your year-end, as we may be able to rectify the situation.

As it stands, you may have to pay a heavy tax bill if you took the cash out as a personal loan, salary, dividend, or any other type of drawing.

Think ahead

Poor cash flow is the reason behind most corporate finance issues. We suggest drawing up monthly or quarterly management accounts to monitor cash flow and identify potential problems before they can arise.

Get advice today

For help and advice with related matters, please get in touch with our team today.