Published: 09/05/2022 By Hannah McCormackWe are seeing more and more reports of cases where substantial bans have been given out to directors who have falsely obtained business bounce back loans.
In a recent case the bans given to the directors were substantial, in addition to which the directors and their respective businesses were publicly named. In serious cases, directors, can face disqualification bans for anywhere up to 15 years, as issued by the Insolvency Service following an investigation. Once banned, a disqualified director is prevented from directly, or indirectly, becoming involved in the promotion, formation or management of a company, without the permission of the court.
Reports have shown that these directors have repeatedly inflated their company’s earnings, making it look like the company’s turnover was way more than it was, so as to increase the size of the bounce back loan award. In many cases the courts are also seeing evidence that the proceeds of such loans have been used by directors for personal use, rather than legitimate business requirements, to assist the company financially through the adverse effects of the pandemic.
Dave Elliott, Chief Investigator at The Insolvency Service said:
“Covid Support Schemes were a lifeline to businesses across the UK protecting jobs and preserving businesses. The Insolvency Service will take swift firm action against directors who sought to abuse the scheme.”
As we know the bounce back loan scheme was created to support struggling businesses during the pandemic but sadly many took advantage of it but not all will go unnoticed!
Robert Clarke, chief investigator for the Insolvency Service, said that the punishments currently being given out to directors sends a clear message that “action will be taken to remove the directors from the corporate arena for a lengthy period of time”.
As you can see more and more companies are being investigated which is why we offer all our clients our fee protection insurance. We are not for one minute suggesting any of our clients have taken out loans fraudulently, or misappropriated the funds received, however, with COVID easing, and many businesses starting the recovery process, we anticipate HMRC increasing the number of tax enquiries, many of which are selected purely at random. Taking out fee protection insurance will provide peace of mind that in the unfortunate event you may become subject to an HMRC tax enquiry, the costs associated with professional representation will be covered.
Please check out our Fee Protection Insurance webpage for more detailed information here or get in touch for a quote.