Misuse of COVID-19 Financial Support Schemes

Over the last year, many cases of business owners misusing COVID-19 financial support schemes have surfaced. The UK Government, which funded over £80 billion worth of business loans as of October 2021, has stated that ‘rigorous checks were put in place to prevent fraud when these schemes were launched’. However, these checks didn’t stop fraudsters from illegitimately applying for financial support during the pandemic.

COVID-19 Financial Support Schemes

Let’s rewind to March 2020: The UK Government encourages retail, hospitality and leisure businesses to apply for business rates relief due to the coronavirus pandemic. Soon after, the then chancellor Rishi Sunak announced the Coronavirus Job Retention Scheme (CJRS), stating that HMRC will cover 80% of all furloughed employees’ wages (up to £2,500/month). Also in March of 2020, three schemes were set up to provide loans to businesses of different sizes affected by the pandemic:

• The Coronavirus Business Interruption Loan Scheme (CBILS);

• The Coronavirus Larger Business Interruption Loan Scheme (CLBILS); and

• The Bounce Back Loan Scheme (BBLS).

With 11.7 million jobs on retainment, and ongoing access to financial support for businesses, it seemed the UK Government had provided a water-tight solution to the disastrous economic impact of COVID-19…

Misuse of COVID-19 Financial Support Schemes

Understandably, people are frustrated with reports that fraudsters took advantage of coronavirus support schemes during the pandemic. At a recent Tory leadership debate, Kemi Badenoch accused Sunak of losing billions of taxpayers’ money to Covid loan fraud. In response, the ex-chancellor insisted that action was being taken to recover the money that’s been lost.

For example, the UK’s Insolvency Service (an executive agency of the Department of Business) has been granted additional powers which no longer limits it to investigating directors of companies who have already entered into formal insolvency procedures. As such, this gives the agency more room to investigate suspected abuses of financial support schemes.

One such investigation was the case of an Indian restaurant in Cardiff, who’s owner, Rathudi Manglanand, now faces nine-year bankruptcy restrictions for his unlawful application for a Bounce Back Loan in April 2020. Manglanand’s restaurant had already ceased trading prior to the beginning of the pandemic and was therefore not eligible for COVID-19 financial assistance. Yet this didn’t stop Manglanand from applying for a £25,000 grant from his local council, followed shortly after with a Bounce Back loan of £18,000 the following month.

The Insolvency Service is expected to have its powers increased further in light of ongoing revelations of the misuse of financial support. Directors found guilty of these offences face severe restrictions, including a ban on directorship of up to 15 years and even criminal prosecutions for abuse of the schemes. These schemes were established to prop-up businesses during an unprecedented global event, but with plans underway to root out further abuses, the Government has stated that ‘we are taking action to make sure that money stolen from the taxpayer is reclaimed.’

Silver Insolvency Solutions

Stephen Silver is an insolvency specialist with over 40 years of experience on the job. Whether you’re concerned about cash flow or facing the prospect of bankruptcy, a limited free consultation with Silver Insolvency Solutions could be of enormous benefit to you. For more information, visit our website at www.silverinsolvencysolutions.co.uk, email us at enquiries@silverinsolvencysolutions.co.uk, or give us a call on 0203 961 7169.