The Insolvency Service’s crackdown on Covid Loan Abuse

During the Covid-19 pandemic, a number of loan schemes were introduced by the government in order to assist struggling businesses. Unfortunately, but perhaps unsurprisingly, these loan schemes were targeted for fraudulent loan applications. Here we briefly examine the work the Insolvency Service has been doing in order to crackdown on any criminal offences which have been committed by businesses.

The loan schemes which were introduced due to the Covid-19 pandemic included the Coronavirus Business Interruption Loan Scheme, the Coronavirus Future Fund and the Bounce Back Loan Scheme.  These schemes all offered financial support to businesses who were hit financially by the pandemic. The schemes offered loans and other kinds of finance up to £5 million to UK-based businesses.

 

The uptake of the schemes was highly successful. However, this in turn enabled both genuine business and criminal enterprises to take advantage of the schemes. 

The Insolvency Service has since set out to crackdown on any business, whether genuine or not, who have made fraudulent claims against these schemes.

 

Their Annual Report published in July 2024 truly depicts the extent of their work regarding Covid-19 loan abuse.

 

The Report highlighted that there has so far been:

The Insolvency Service has also taken steps to recover nearly £3 million through compensation orders or compensation undertakings.

The Annual Report provides a clear picture of what type of outcomes can be expected from the prosecutions into this type of fraud. For example, one sole trader was ordered to repay a fraudulently claimed loan in full and was sentenced to a two-year suspended sentence. Another director, who was found to have abused the Bounce Back Loan scheme, was ordered to repay the excess amount they had falsely claimed plus interest. 

 

In addition to this, the average length of director disqualification for Covid misconduct in 2023-24 was almost 10 years.

The Insolvency Service continue to receive additional funding to investigate Covid-19 Financial Support Misconduct, and their work will continue into 2024-2025.

 

In April 2024, Dean Beale, the Chief Executive at the Insolvency Service has stated that ‘[they] have teams dedicated solely to investigating Bounce Back Loan misconduct that are committed to taking action against those who provided misleading information to receive money they were not entitled to.’

 

It is inevitable that over the next months and years, more businesses will start to face investigations and enforcement action including prosecutions in relation to the Covid-19 Loans.

At Olliers, we have specialist defence solicitors who can provide advice and assistance to those who may find themselves being investigated or facing prosecution by the Insolvency Service (Insolvency Service investigations | Olliers Solicitors | Law Firm). Please contact our specialist team by completing the form below, telephoning 0161 834 1515 (Manchester) or 020 3883 6790 (London) or email info@olliers.com