Covid-19 Bounce Back loans for property businesses

Thank you Phil Ashford for putting the record straight.

Looks like Andrew Roberts didn't manage to read all the way to point 8 of the eligibility criteria on the British Business Bank website. But he and Ranjan should come back on this point - we all make mistakes and they should acknowledge that they have mistakenly claimed that landlords are eligible for this scheme.

After, eventually finding how to find the BBL form. I tried to complete it. First problem mentioned above i thought i was going to come across the trading hame or business banking. I put my name and sole trader in brackets. It gave me the option to select business using private / personal banking. That wasc a relief.
However, after completing the form and it was submitted i had to send a copy of my tax return. Presumably to prove income / turnover and the UTR number.

But the system only accepts PDF, XLS or XLSX file. None of which scanning in was available. On .bmp or .tft etc.

I eventually got a piece of software, costing £15 to transfer .bmp to pdf. Yay.!
When i attached it to the file it wouldn't accept it because it was more than the 5mb allowed.
After 2 hours talking to the bank, being bumped here there and everywhere i was told to post my tax return.
I dont think it was particularlyvan easy set up.
If i was told to post it in the first place i might not have wasted 5 hours and spent, albeit small £15 plus.

Perhaps I am being completely naive here! And splitting hairs. But I am under the impression that, in my personal situation at least, my little BTL business is eligible.
We operate in a Ltd company structure. It's an SPV for property. We're quite small and have a turnover just shy of £50k a year. We have a business bank account. The two big questions in the previous forum posts are:
1. Are we trading/commercial or are we investment?
2. Do we get 50% of our turnover from trading?
I am aware of the case-law saying buy-to-let is an investment.
Firstly, I do wonder if that case-law is relevant here? HMRC cases are about taxation. But this is a loan application.
Secondly, I just checked my last company accounts. It states my "Sales" in the turnover section. My "Sales" account for 100% of my turnover. We don't make any "Investment" income. It says Sales.
The average lay-person will not be aware of the HMRC case-law on whether we are trading or investment. But they will see the "Sales" figure on their annual accounts and come to the honest and genuinely held conclusion that their BTL limited company is indeed a trading/commercial activity, at least for the purposes of this application.
Since 100% of my turnover comes from my "Sales" (i.e. rent), I believe at face value that we qualify.
It may well be a different matter for those who operate as sole traders.
Disclaimer: I probably have no idea what I am talking about! 🙂

Reply to the comment left by Will Taylor at 06/05/2020 - 14:07
Will, when you submit a CT600, you do so on a self declaration basis. It is a Director’s duty to do so compliantly. You may have delegated the responsibility to your Accountant, but you are accountable in full for the Ltd’s submission.

The CT600 splits out the various income streams between trading, investment and income from property - otherwise known as Schedule DI, Schedule DIII and Schedule A income streams. You may never have realised this.

The fact that your Accounts, which you authorised and signed and submitted as a Director in accordance with Companies Act 2006, says “sales” is irrelevant, it’s certainly not independent proof that it’s therefore “derived.... from trading activity”.

In the absence of “Trading Activity” being defined outside of its normal “ordinary meaning”, then one should prudently look for the best support for what it’s ordinary meaning could be. Tax Law and Case Law presents the best place for this as Income from Trading has been well tested.

There are people across the Internet telling me to stop using the tax legislation to bolster my question to Ranjan and Andrew. This seems rather perverse, in the sense that it appears like the most reasonable basis to ascertain what Trading Activity may be, when a government uses it in scheme eligibility rules, rather than how Dave/Jim/Sarah felt like interpreting it on a sunny Wednesday afternoon in May.

I’m sure when people are filling out their Tax Return for rent they will put it in the “Income from Land and Property” pages of an income tax return, they wouldn’t want to put it in the Self Employed boxes and pay National Insurance on it (it is trading income after all!).. I think Dave/Jim/Sarah would contradict their own definition of Trading Activity to make it suit them, rather than establish what the meaning may reasonably be and qualify themselves on that basis.

Reply to the comment left by Phil Ashford at 06/05/2020 - 14:22
Thanks for the education there Phil.

I understand why you are tempted to use tax case-law to define "trading". It makes sense. It's been well defined.

That being said, I am cautious with using tax law here. Just because trading has a certain definition for taxation purposes, that does not mean that the same definition applies in every other situation.

Allow me an example. An agency worker is the employee of an Employment Agency for payroll and taxation purposes. But if the agency worker is injured at work, on the Client's premises, then the agency worker is considered an "employee" of the Client in any prosecution or compensation claim. And that matters. Because it's the client who ends up paying the compensation and getting prosecuted. Because the Client is the Employer under health and safety case-law. Not the Agency, who is the employer under tax law.

My point is, for what it's worth, that the definitions from tax case-law may not automatically apply for financial loan applications. But, I do agree it seems reasonable to ask the question in the absence of a clear definition elsewhere.

I also think the concept of "men's rea" applies here. Buy to let limited companies who have genuinely been affected (like mine) will be applying for these loans with honest intent. They do not intend to defraud the government. They have read the eligibility criteria, written in fairly plain English, and believe they can apply. Certainly, there is no expectation that SMEs get legal advice on these loan applications. And I think there is certainly enough doubt to make it difficult to secure a conviction for "fraud" in our case.

Time will tell!

Reply to the comment left by Will Taylor at 06/05/2020 - 14:42
Will,
All very well reasoned I think. Just one point on your expectations re legal advice. Under the eligibility criteria, the final paragraph states:

'Borrowers are advised that they should seek independent legal advice if they are in any doubt about the consequences of the loan agreement not being regulated by the Financial Services and Markets Act 2000 or the Consumer Credit Act 1974 or any other aspect of taking out a loan.'

Reply to the comment left by Paul Shears at 06/05/2020 - 10:10
In a Word "NO"

I have tried to access the landlords government loan umpteen times but always hit a brick wall. They tell me its just like a personal loan where you have to meet the banks criteria, l have never managed to get to the "submit application".
There are so many "offers" they tell me but none you can finish.
Has anyone actually received a loan yet, l would like to know how they did it ?

Thank you, john

I'm at a loss as to why you keep referring to 50% of income for the BBBL! The application is 7-9 questions. The qualifying criteria is that you are a limited company trading as at November 2019, you can prove your turn over of which you are eligible for up to a limit of 25% for the loan, you have been impacted by the Covid-19 pandemic. Of course they want your business details, it is a business bounce back loan! The government don't recognise individuals (non limited companies) as a business, so you don't qualify. Anyone can setup a limited company to benefit in several ways, run your rental business through that company. You don't have to transfer your properties or any other assets into the limited company, it can simply be a trading vehicle.

Hi Terry,
I have never mentioned the 50%, that wa done by Will a few days ago.
I was just questioning the government loans which l find hard to fathom out.
Maybe l am not grasping how we need to approach it, even my bank Barvlays seem to be at a loss.
I just wish they could lay the process out for everyone to understand,

John.