The Insolvency Service is cracking down on companies that abuse the Bounce Back Loans Scheme, which was set up by the government during the Covid-19 pandemic. Such companies are facing measures such as director disqualifications and winding up petitions.
What is the Bounce Back Loan Scheme?
The government introduced the Bounce Back Loans scheme to support businesses during the Covid-19 pandemic. Under this scheme, loans were offered to both registered and unregistered small businesses of up to £50,000 or a maximum of 25% of annual turnover. The scheme did not require credit checks on borrowers, who were left to self-certify that they met certain qualifying criteria. It has now closed to new applications.
Unsurprisingly, it has emerged that the controversial loan scheme has been subject to widespread abuse and may have cost taxpayers billions through fraudulent loans and payments made in error.
Below are some examples of crackdowns made by the Insolvency Service in recent months.
200k Loan Fraud Leads to Directors’ Disqualification
A disqualification undertaking was made against two men in November who set up fake businesses to claim £200,000 in emergency covid loans. One was banned for thirteen years and the other for six years. As a result, neither can also be involved in the promotion, formation or management of a company without the permission of a court.
Investigations were triggered when the men put their companies into voluntary liquidation after claiming the loans and it subsequently emerged that there was no evidence that any of the companies had ever traded. The Insolvency Service found that cash was withdrawn from the companies and used to buy a Rolex watch, transferred into personal accounts and to other parties.
Takeaway Business Owner Barred After a Bogus Claim
A takeaway business owner based in Leicester who fraudulently claimed £31,000 in covid loans has been disqualified from being a company director for nine years. The fraud only became apparent after his company went into liquidation earlier this year. Investigators for the Insolvency Service found that the owner had exaggerated his business’ turnover, claiming that it had been £200,000 before the pandemic when it had actually been only £74,000, meaning that he should have been eligible for a lower loan than he claimed.
For more information about Covid-related fraud or director disqualification, please get in touch at info@witansolicitors.co.uk.
