Should accountants report on clients?

Have any of your clients taken out a Covid-based loan?  If so, then what are your responsibilities as the advising accountant?

At PBC we have noticed a marked increase in businesses looking to close down (by way of strike off or through liquidation) where there is an outstanding bounce back loan (“BBL”) or a CBIL, or in some cases, both.

Due to the uncertainty of what must be done to demonstrate they have exhausted all avenues of recovery (before being able to claim under the Government guarantee) lenders are objecting to strike off.  Lenders are also writing to directors, pressurising them to repay the Covid loans.  There is also a notable heightened attention to companies in liquidation with unpaid Covid loans (for director disqualification and restoration purposes) where Covid loan monies have been used for personal benefit.  As you will be aware, in order to receive a BBL in the first instance, the applicant had to confirm it would not be used for personal purposes but working capital for the business.

So, where does this leave the advising accountant?

While accountants are not required to identify what a BBL was used for, it is likely they will receive this information when preparing their clients’ accounts. If accountants consider their clients may have used BBL funds for personal purposes (e.g. to redeem a personal loan or to purchase a family car etc) they may, depending on the circumstances, have an obligation to submit a Suspicious Activity Report (“SAR”).

ICAEW members (whether in private practice or in business) must adhere to the Code of Ethics which includes the fundamental principle of integrity. Paragraph R111.2 provides an accountant shall not knowingly be associated with reports, returns, communications or other information where they believe that the information:

  • contains a materially false or misleading statement; or
  • contains statements or information provided recklessly; or
  • omits or obscures required information where such omission or obscurity would be misleading.

In addition to the ethical code, accountants must consider their anti-money laundering obligations. In general, accountants are required to submit a SAR to the National Crime Agency, where information comes to them in the course of their business, which leads them to suspect that another person is engaged in money laundering.

As will be the same for insolvency office holders, accountants should question the application of Covid loan monies and consider whether those monies now form an adverse directors’ loan account.  These enquiries may sail close to tipping off under the money laundering regulations so extra caution is advised in such circumstances.  In our opinion, serious consideration of submitting a SAR must be given if the information to secure the BBL or CBIL in the first instance was false or misleading.

As a guide, when looking at circumstances specifically surrounding BBLs we suggest advising accountants consider:

  • Had the company filed dormant accounts for 2019 and/or 2020?
  • Was turnover overstated (in the on-line application) by more than 25%?
  • Was a loan obtained for more than 25% of turnover?
  • Were the directors aware of insolvency at the time of application?
  • Was the application after a petition or winding up resolution?
  • Was the business trading outside of the UK?
  • Had the business ceased trading pre-1 March 2020?

Directors are increasingly seeking to defend insolvency officeholder actions by pointing the accusing finger at their accountant and if that accountant has failed to meet their prescribed duties it could place them in an uncomfortable position. It, therefore, goes without saying you should be satisfied with the level of conduct demonstrated by your client when it comes to BBL or CBIL as, with some 1.5 million loans made, this could become a very hot topic.

Should you have an insolvency-related issue then please contact me at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at


A Government scorned?

How many of you have taken out a bounce back loan, a CBIL, claimed furlough or even claimed under the Eat out to Help out scheme?  I guess many readers will be nodding their head at this point because most businesses have claimed some of this Government support during the pandemic lockdown.

For many businesses these schemes will act as the saviour and the loans will be repaid in accordance with the terms.  However, there has also been plenty of media surrounding those who have misused or misapplied funds originating from these schemes.  At the end of the day, it is taxpayers’ money (and will have to be repaid in due course) so those more unscrupulous applicants need be aware of the potential consequences.

While bounce back loans and CBILs under £250,000 are not personally guaranteed, directors need to understand that does not mean you escape personal liability.  For example, if a director draws down some of the loan to pay personal liabilities, that in turn creates a directors’ loan account, being a debt repayable to the company.  It can get worse as HMRC could determine that the personal use was income and accordingly, gives rise to PAYE where the director can be held personally liable.

It has been reported that as of 30 June 2021 HMRC had conducted more than 12,000 investigations into coronavirus fraud.  Indeed, there have been several arrests with the number of prosecutions inevitably going to rise over time.  Further, a director in Bolton was disqualified from acting as a director for 11 years after he claimed a bounce back loan when not eligible and subsequently used the funds for personal gain.

In the disqualification case (above) the director, clearly, thought ensuring there were insufficient accounting records would aid his defence as there was no evidence of accountability.  Apart from a failure to maintain accounting records can be a criminal offence, banking records will always offer some form of transaction tracing.

So, what should I do?

I am bound to say, take early advice.

If you have used the corporate schemes for personal benefit, then look at how you are going to repay the amount taken.  When liquidators pursue a director for malpractice, they are looking for restoration and this can become a drawn-out and costly affair for the director.

A common practice appears to be to extinguish personal loans by way of dividends.  However, if the company has insufficient reserves, then drawing dividends is unlawful.  Even if there are sufficient reserves, a loan-extinguishing dividend is exposed to challenge as a breach of duty.

In terms of any breach in the job retention scheme, while it seems concerning, you should confess to HMRC and seek ways of restoring the position.  It is better to approach HMRC and include a proposal for making good than to be found out!

The Government have made it clear HMRC are to adopt a commercial understanding when it comes to recovery of tax liabilities and coming forward early should facilitate a structured restoration agreement.  Stick your head in the sand then be prepared as hell hath no fury like [the Government] scorned!

Should you have an insolvency-related issue then please contact Gary Pettit at PBC Business Recovery & Insolvency on (01604) 212150 (Northampton office) or (01234) 834886 (Bedford office). Alternatively, you may send an email to or access our website at


The Supreme Court has unanimously dismissed the Insurers’ appeals and allowed all four of the FCA’s appeals


The Supreme Court has unanimously dismissed the Insurers’ appeals and allowed all four of the FCA’s appeals, which is positive news to policyholders across the country that have suffered business interruption losses as a result of the COVID-19 pandemic.

At first instance the FCA had been successful on many of the issues and now the Supreme Court has found substantially in favour of the FCA on the issues appealed.

The Supreme Court are currently delivering their verdict on this important issue and we will provide further updates as it come through

Any questions please call Gary Pettit on 01604 212150

Lockdown 2 – Open for Business and Support

The news none of us wished to hear was announced with the UK being placed under lockdown until 2 December 2020.  This could not be any worse for many businesses who are believing this maybe the final straw.

At PBC we recognise businesses need access to advice and assistance without any delay.  Accordingly, the PBC Team continue to be available, while also recognising the need to comply with the lockdown provisions.

There are some key dates advisors should be aware of when assisting your clients.  These include:

  • Crown preferential status returns on 1 December.  This will relate to all unpaid tax liabilities on any formal insolvency procedure that comes into effect on or after 1 December and could impair any effort of restructuring a business.
  • Under reforms to The Corporate Insolvency & Governance Act 2020 two interim prohibitions were extended to 31 December.  These are:
  • Serving of statutory demands or presentation of winding up petitions; and
  • A landlord of commercial property may not take enforcement action against a tenant for amounts due that fall within the COVID interim period.


A more concerning point of note is the freezing of the wrongful trading period was not extended beyond 30 October.  Accordingly, directors and business owners alike are now exposed to personal liability or (where an individual is made bankrupt) a bankruptcy restrictions order should they continue to increase liabilities with no reasonable prospect of avoiding insolvent liquidation or bankruptcy.  The inability to trade (as a result of lockdown) does not stop liabilities from continuing to accrue so clients need to assess the financial position of their business and take early advice