Read on for the background story of this case.
Paul Matthews (“Mr Matthews”) caused Pathfinder IT Systems Limited (“Pathfinder”) to apply for and obtain a Bounce Back Loan (“BBL”) of £50,000 at a time when he knew or ought to have known that Pathfinder could apply for a maximum BBL of £23,662.
Further, between 20 October 2020 and 11 November 2020, Mr Matthews paid himself £47,463 of the BBL funds.
These payments breached the conditions of the BBL, which stated that the loan would only be used to provide economic benefit to the business and not for personal purposes.
In that:
- On 12 August 2020, Mr Matthews applied for a BBL of £50,000 on behalf of Pathfinder. In the BBL application form, Mr Matthews declared Pathfinder’s estimated annual turnover to be £250,000.
- The BBL scheme allowed businesses affected by the Coronavirus pandemic to apply for a government backed loan of between £2,000 and £50,000, up to a maximum of 25% of turnover in the calendar year 2019.
- Where a business was established after 01 January 2019, a business could provide an estimate of its annual turnover.
- Pathfinder was not incorporated until 27 March 2019, and so was eligible to provide an estimated figure for annual turnover on the BBL application form.
- On 27 March 2019, Pathfinder commenced trading. Pathfinder’s draft accounts for the period from 27 March 2019 to 31 March 2020 showed turnover of £74,793.
- Pathfinder’s sales records show that from 12 August 2019 to 11 August 2020 (the year prior to the BBL application) turnover was £94,649, indicating that Mr Matthews overstated turnover by at least £155,351 and therefore his estimated figure for annual turnover was not reasonable.
- Mr Matthews has indicated that the BBL funds were to be used to diversify the business and that the estimated turnover figure of £250,000 included the turnover he anticipated receiving from the new business venture.
- Mr Matthews has failed to provide any evidence in support of this, despite requests made of him.
- As a result of the overstatement of turnover, Pathfinder was granted a BBL of £26,338 more than it was entitled to.
- On 13 August 2020, the BBL funds of £50,000 were paid into Pathfinder’s bank account.
- Between 20 October 2020 and 11 November 2020, after Pathfinder’s sole contract with a customer had ended on 09 September 2020, Mr Matthews paid himself a total of £47,463 of the BBL funds.
- Mr Matthews has confirmed that these funds were used for his own personal benefit and that it was not viable for the company to obtain a new IT contract after that date, due to changes in IR35 legislation.
- On 15 September 2021, Pathfinder went into liquidation.
- The BBL lender has stated that the balance outstanding in respect of the BBL at that date is £50,070.
