Contax Law CoVID 19 Update: Contractor personal services companies boosted by “bounce back” loans

To all our contractors,

Contax Law have always encouraged its contractors to offer their services to our FTSE 100 clients via their own personal service companies which have their own professional indemnity insurance; in other words they effectively run their own businesses. We believe that even when IR35 is fully implemented the personal service company model will still be one to maintain for many roles.

Please see below the latest advice from our Accountants regarding the Government Bounce Back loans. We believe that those who have been operating under their own limited service companies will be entitled to make an application for these loans provided they have not already applied for the previously rolled out Coronavirus Business Interruption Loan Scheme (CBILS). Rather unhelpfully, the government web site does not mention that the maximum loan will be limited to 25% of the company’s turnover, but this should be made clearer from the 4th May when the scheme is open for applications.

New 100% government backed loan scheme for small businesses.

Small firms are to get access to 100% taxpayer-backed loans after many raised concerns about slow access to existing coronavirus rescue schemes, the Chancellor announced yesterday, April 27th.

  • Businesses will be able to borrow between £2,000 and £50,000 and access the cash within days
  • Loans will be interest free for the first 12 months, and businesses can apply online through a short and simple form
  • We will update you as we receive more details

Chancellor Rishi Sunak told the House of Commons the scheme would start next week, offering firms loans up to £50,000 within days of applying.

It aims to unlock a backlog of credit checks by banks amid fears many small firms could fold before getting loans. The scheme requires applicants to fill in a two-page self-certification form online.

The scheme has been designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days, and comes alongside the £6 billion awarded in business grants, supporting 4 million jobs through the job retention scheme and tax deferrals supporting hundreds of thousands of firms.

The Chancellor of the Exchequer, Rishi Sunak, said:

“Our smallest businesses are the backbone of our economy and play a vital role in their communities. This new rapid loan scheme will help ensure they get the finance they need quickly to help survive this crisis.”

The loan terms mean that no capital or interest repayments will be due for one year. Instead, the government will pay the interest for the first 12 months.

Banks have come under fire for delays in handing out loans, but have blamed the heavy workload, need to complete the necessary credit checks, and a shortage of staff.

Mr Sunak had come under pressure to underwrite all loans, not just those up to £50,000. But he told the Commons that he was not prepared to do this as he needed to balance the risk to the taxpayer with the needs of small businesses. He said:

“I’ve heard some calls for the government to underwrite all our loan schemes with 100% guarantees. I remain unconvinced by the case for doing that universally. We should not ask the ordinary taxpayers of today and tomorrow to bear the entire risk of lending almost unlimited sums to businesses who may, in some cases, have very little prospect of paying those loans back and not necessarily because of the impact of the coronavirus.”

I hope you are able to take advantage of this loan scheme as you have my support in these difficult times as a fellow entrepreneur running your own company.

All the best,

Nick Robbins, CEO

Best Contract Lawyer Legal Services Provider (UK)- Acquisition International 2019 Legal

 

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