Accountancy and Tax update
Self Assessment taxpayers have been offered extra time to complete their 2020/21 tax return and make their payment. HMRC has waived the £100 penalty for late filing and payment until 28 February, due to the impact of Covid-19. This means that people have until 28 February to file their Self Assessment tax return and make their payment in full, no penalties will be levied if filed during February. However any tax owing at 31st January is still due and will incur interest if paid late.
For those struggling to pay their tax bill, there is also an option to set up a Time to Pay arrangement before 1 April with no penalty.
Below is a cautionary tale regarding fraudulent claims for Bounce Back loans. The two businesses in question did not fit the criteria and used the loan to make payments to family members. They were investigated by the Insolvency Service and received significant bans.
Bounce Bank Loans fraudulent claims
Two Yorkshire-based directors have been banned for a total of 21 years after they fraudulently claimed £100,000 in bounce back loans
Aamer Aslam from Huddersfield has been handed a ban for 11 years and Razwan Ashraf from Keighley for 10 years after they claimed bounce back loans (BBL)
The duo were co-directors of Scholars Academy Ltd which is a specialist tuition centre for children aged five to 17 in West Yorkshire and in May 2020 Aslam applied for a bounce back loan by providing an estimated company turnover of £200,000.
Scholars received the loan of £50,000 but went into voluntary liquidation in January 2021 which triggered the investigation from the Insolvency Service. At the time of liquidation, the directors listed the company’s liabilities to the bank as £7,000, but the bank later notified the liquidator that it was owed £50,000 by the company due to the bounce back loan.
The Insolvency Service investigation found that the duo was inflating the company’s turnover with Scholars’ bank statements showing a maximum monthly income of just £640 which means their turnover was only £7,680 and did not meet the criteria to apply for a bounce back loan.
It was also found that Aslam and Ashraf used the bounce back loan money to make monthly payments to four family members of Ashraf. All four received £2,000 a month after the duo received the loan money. Aslam and Ashraf told the Insolvency Service that that these payments were genuine business expenses but they were unable to provide evidence to support this.
Alongside this, Ashraf was also the sole director of another educational company, Progress First Ltd, and in May 2020 he applied for a bounce back loan and fraudulently declared in the application form that annual turnover in 2019 was £200,000 when Progress’ bank statements showed that turnover was £38,973.
This resulted in Progress receiving the full loan of £50,000 when it would only have been entitled to a loan of £9,927.
As with Scholars, Ashraf claimed that the money was used to pay for company expenses however, regular payments were made to three individuals, and no evidence was produced to show that these payments were genuine business expenditures.
Ashraf has since repaid £35,000 to the liquidator to settle claims against him for the Progress loan, and a further £25,000 in settlement of claims against both directors in relation to the loans taken out by Scholars.
Mike Smith, chief investigator, Insolvency Service said: ‘Government loan schemes have provided a lifeline to millions of businesses across the UK, preserving their existence during the pandemic and protecting millions of jobs.
‘As these cases show, the Insolvency Service will not hesitate to investigate and use its powers against those who appear to have abused the Covid-19 support schemes.’