Government and insolvency services have announced that they will take action against businesses that have incorrectly used the financial support available during the COVID-19 pandemic.
There have been many cases where businesses have been fraudulently claiming support during the pandemic and as the country is now set to begin winding down support, the government is finding ways to recoup the costs and balance the books.
Rightfully, many businesses acting fraudulently have been highlighted and even some have been punished for their behaviour.
Since February 2021, the Insolvency Service has petitioned the courts to wind up numerous Ltd companies. They have been successful in 5 cases, where the companies have fraudulently claimed and abused government loans. These loans were introduced to help struggling businesses during the pandemic, who were struggling to pay bills and staff.
These companies included two based in Glasgow and one in Manchester. All had no business activities since January 2020. Two of these companies secured Bounce Back Loans (BBLS). One company secured two Coronavirus business interruption loans which together meant a payout of £240,000. These were granted based on false information.
The Mr. Khan case
Mr. Khan aged 26, has been disqualified as a director for 12 years. He was the director of Ikandy wholesale, based in Birmingham. He fraudulently claimed £50k through the BBLS. Mr. Khan then transferred the full amount into his bank account just days before the company filed for administration.
The company’s accounts were frozen and the company was set to be shut down. However, Mr. Khan forged documents, convincing the bank that this decision had been reversed. Meaning he was able to transfer £70,000 from the companies accounts and into his own account. This included the £50,000 BBLS.
The Government and Insolvency Service have commented on the situation:
“The loans and schemes introduced during the covid-19 pandemic had the sole purpose of helping out businesses that were struggling. Those who have abused these schemes and loans will be investigated and action will be taken as this is an extremely serious issue.”
- Dave Elliot, Chief Investigator at the Insolvency Service
The service has urged anyone to come forward if they have any information regarding businesses and directors who are abusing the BBLS and similar loans.
Soon, the insolvency service will have further powers to investigate businesses that have been dissolved, and their fraudulent claims of the BBLS.
The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill is currently in the reporting stage in the House of Commons. If passed, it will give the service the power to investigate companies that have made such fraudulent claims. If such actions are found, they will have the power to disqualify directors who have made these claims. If company directors are found to have made these fraudulent claims, they could face a ban of up to 15 years and even prosecution.
The bill will also allow for retrospective investigations, meaning the Insolvency Service can look into claims made before the law comes into place.
To report any fraudulent claims, visit the Insolvency Service website.