Small business owners withdrawing from paying back Covid debt will be banned
Small business owners who liquidate their businesses to avoid paying back Covid debt could be banned from running the business.
Owner directors found guilty of abusing bankruptcy proceedings to break free from paying back their small business’s Covid debt could be banned for up to 15 years.
Approximately 1.5 million small businesses have taken out bounce back loans through a program that offered up to £ 50,000 interest free for a year.
> See also: Almost two-thirds of bounce-back loans could go bad, the government says
And the new, reinforced insolvency service will be able to retrospectively examine companies that have already been wound up.
The government pledged to curb potential Covid-19 emergency loan repayment fraud in the budget earlier this year.
Officials are keen to close the bankruptcy gap in order to contain any losses to the taxpayer if banks start charging interest or getting loans back on government-backed systems after the repayment vacation is over.
> See also: Half of small businesses will never repay bounce-back loans, banks warn
The dissolution by strike or voluntary liquidation may only be used by a small company without prior insolvency and only if the company has no more assets, has not acted and the creditors have been informed.
However, the liquidation process is sometimes tacitly abused by directors who simply liquidate their businesses without bankruptcy in order to drop liabilities and avoid investigation.
The new measures also prevent directors of dissolved companies from starting a nearly identical company.
The government said the process of frequently losing out on customers and creditors, including HMRC, “is no longer used as a fraudulent method of avoiding repayment of government-sponsored loans to businesses in support of those businesses during the coronavirus pandemic can be “.
“Rogue directors who exploited the loophole in the law that allowed them to deliberately dump their businesses to avoid paying their employees, suppliers, taxes, or taxpayer-backed loans must be careful because of these new legislation closes this door tightly and permanently, ”Economy Secretary Kwasi Kwarteng told the Times.
What if i can’t repay my bounce back loan?