Bounce Back Loan Scheme could lose taxpayers £26b

The government faces a potential loss of £15 billion to £26 billion through businesses not being able to repay the loans made through the Bounce Back Loan Scheme and fraud.

That’s the conclusion of a National Audit Office (NAO) report into the Bounce Back Loan Scheme, launched in April to provide loans of up to £50,000 to small businesses to support their financial health during the Covid-19 pandemic.

The Department for Business, Energy & Industrial Strategy (BEIS) and the British Business Bank (BBB) expect the scheme to lend £38 billion to £48 billion by 4 November 2020, substantially exceeding the assumed £18 billion to £26 billion when it launched.

As of 6 September, HM Treasury data shows that the scheme has delivered more than 1.2 million loans to businesses, totaling £36.9 billion. Around 90% of the loans have gone to micro businesses with a turnover below £632,000.

The loans were delivered through commercial lenders such as banks and building societies, with the government providing lenders a 100% guarantee against the loans. Businesses are expected to repay the debt in full.

As a result of credit and fraud risks, BEIS and the BBB have made a preliminary estimate that 35% to 60% of borrowers may default on the loans, based on losses observed in previous programmes similar to the scheme.

This has led the NAO to call for the government to implement a thorough debt-recovery process with lenders and consider how it might better prevent fraud in any future schemes.

Gareth Davies, head of the NAO, said: “With concerns that many small businesses might run out of money as a result of the Covid-19 pandemic, government acted decisively to get cash into their hands as quickly as possible.

“Unfortunately, the cost to the taxpayer has the potential to be very high, if the estimated losses turn out to be correct. Government will need to ensure that robust debt collection and fraud investigation arrangements are in place to minimise the impact of these potential losses to the public purse. It should also take this opportunity to consider now the controls it would put in place to protect against the abuse of any future such schemes.”

HMRC issues tax scams warning to students

Students who started university this year are being warned by HMRC that they are being targeted by a fresh wave of online tax scams.

With universities taking a blended approach to online and face-to-face tuition this year, and an increase in remote working due to the pandemic, students could be left particularly exposed to the work of fraudsters, says HMRC.

First years are also be more vulnerable to these types of scams due to their limited experience of the tax system.

HMRC has written to universities, through Universities UK, asking them to help ensure their students know how to spot a scam.

In August, HMRC received reports from the public of more than 74,800 scam emails, text messages and phone calls. Nearly 41,300 of these specifically offered bogus tax rebates. Thousands of these scams were targeted at students and the criminals involved appear to have obtained their personal university email addresses by unlawful means. These scams often offer fake tax refunds or help with claiming Covid-related financial support.

Criminals also use phone scams to threaten taxpayers into handing over cash. Some 651,600 scams have been referred to HMRC since August last year. Of those, more than 215,660 were voice or phone scams, known as ‘vishing’.

Jesse Norman, Financial Secretary to the Treasury, said: “We are concerned that remote working because of Covid-19 could lead to more tax scams targeting a new and potentially vulnerable university intake.”

HMRC guidance on trading with the EU in 2021

HMRC is contacting businesses that move goods between Great Britain and the European Union to explain what they need to do to be able to trade with the EU from 1 January 2021.

Businesses that import and export between GB and the EU need to prepare now for that new procedures for moving goods to and from the EU from January, including:

making sure they have a UK Economic Operator Registration and Identification (EORI) number.
deciding how they will make customs declarations and contacting a customs intermediary to help move their goods.
checking if their imported goods are eligible for staged import controls.

An HMRC spokesman said: “These actions are vital for businesses to be able to keep trading with the EU – they will not change regardless of the outcome of the government’s negotiations with the EU.

“The letter we’ve sent to over 200,000 VAT registered businesses is published on GOV.UK. We have also launched a short video explaining how a customs intermediary can help businesses manage customs processes. Businesses that move goods in and out of the UK and are new to the customs processes may find this video helpful.”

All the revenue’s recent videos about importing and exporting can be viewed at https://tinyurl.com/ya5lfg6v