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Bounce Back Loans – Government’s Powers of Investigation Increased

The Bounce Back Loan Scheme was introduced by the Government in April 2020 as a lifeline for small businesses throughout the Coronavirus pandemic.

The scheme allowed small businesses to apply for a loan from £2,000 up to £50,000 or a maximum of 25% of their annual turnover. Further details of the scheme can be found in our previous article Recovery Of Coronavirus Bounce Back Loans – Directors Beware!.

The Government’s stance has hardened on the repayment of the money borrowed under the Bounce Back Loan Scheme, resulting in new legislation being passed which has increased the Government’s power to investigate retrospectively those who relied upon and used the Bounce Back Loan Scheme.

The act in question – Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (the “Act”).

The Act allows the Insolvency Service to investigate the following:

  • Filing the required Bounce Back Loan Scheme paperwork under a false name in order to receive the loan or an additional loan;
  • Using the Bounce Back Loan Scheme loan to fund personal endeavours;
  • Misrepresenting turnover to obtain a larger Bounce Back Loan;
  • Directors who dissolved companies in order to leave Bounce Back Loan Scheme behind;
  • Directors who applied to multiple lenders to obtain larger Bounce Back Loan Scheme funds; and
  • Companies whose senior leadership teams made employees fill out fraudulent applications on their behalf in order to secure larger loans.

 

Misuse of the Bounce Back Loan Scheme

The Times reported on the misuse of the Bounce Back Loan Scheme and revealed that officers at border control had stopped individuals “carrying large amounts of money suspected of being from coronavirus Bounce Back Loans”. The money has been confiscated by border control officials and legal enquiries are being made. The newspaper revealed how the funds received under the Loan Scheme were used to purchase cars, watches, fund home improvements and pay off gambling debt. One analyst involved in the newspaper’s investigation believed that the fraud they had discovered was only the tip of the iceberg.

The newspaper further stated that £4.9 billion spent by the Government on Bounce Back Loan Scheme was suspected to have been lost to fraud, showing a clear breach of directors’ duties must have occurred within many companies.

The Act will allow the Insolvency Service to crack down on those who abused the Bounce Back Loan Scheme and enable them to continue to take action against those who fraudulently claimed COVID-19 business support.

 

If you require advice about any of the issues raised above, please contact Victoria Dunstall or Annabel Whittaker directly or click here to send an email

Posted on July 4, 2022

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