The Insolvency Service has taken action against businesses abusing COVID-19 financial support
Raashid Khan (26) has been disqualified as a director for 12 years after fraudulently claiming £50,000 through the Bounce Back Loan Scheme (BBLS) before transferring the full amount out of the company’s account to himself just days before his company went into administration.
Since February 2021, the Insolvency Service has successfully petitioned the Courts to wind up five limited companies that have been involved in abusing government loans, introduced to help businesses during the pandemic.
These include a furniture retailer in Manchester, and two Glasgow-based companies, for which no legitimate business activity was identified since at least January 2020.
Two of the companies secured Bounce Back Loans, at least one of which was procured on the basis of false information. One of the Glasgow-based companies also secured two Coronavirus Business Interruption Loans totalling £240,000 on the basis of false information.
Bounce Back loans
The Insolvency Service have said “The Bounce Back Loan scheme was made available to help support businesses during the pandemic. It is outrageous that some directors have been trying to abuse this support, and the action we have taken shows we take this issue extremely seriously. We urge anyone who suspects a company has been involved in this kind of abuse, or has information about directors fraudulently obtaining Covid business support, to alert us immediately.”
The Insolvency Service will also soon have extra powers to investigate Bounce Back Loan fraud in cases where the company has been dissolved.
The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, currently before Parliament, if passed will give the Insolvency Service powers to investigate, and if appropriate take action to disqualify directors of companies which have fraudulently claimed Bounce Back Loans but which have since been dissolved. This power will be retrospective to allow conduct that took place before the law comes into force to be investigated.
If wrongdoing or malpractice is found, directors can face sanctions including a ban of up to 15 years, and potentially criminal prosecution.
Put simply this is likely the this end of a very thick wedge as HMRC and the Insolvency service ramp up investigations into potentially fraudulent applications for support and the audit the actual use these funds have been put to.
There’s no doubt that the government support has been generous and prevented many businesses from folding, but the necessary ease of application will have undoubtedly lead to some unscrupulous individuals making claims that aren’t wholly legitimate. Similarly some may have made claims in error and there is currently a mechanism for repaying Covid support that has been made in error.
The cases above however clearly show that the Government will not hesitate to pursue individuals they believe to have acted illegally!
If you have any questions around the Covid support available or any other issues please call us on 0345 177 5500 or use our online chat function.