Insolvency Service uses new powers to ban Covid loan fraudsters

28th July 2022

The Insolvency Service has used its new powers to investigate and sanction directors who dissolved their companies to avoid repaying bounceback loans.

The Service has begun using new powers, given to it last December, to crack down on company directors that dissolve their firms to avoid making repayments on government-backed loans.

The crackdown has seen the Insolvency Service issue bans against at least 179 individuals for defrauding the government’s Covid support packages. Fraudulent Covid support claims cost the British taxpayer at least £5bn, HMRC figures show.

In three cases, individuals were struck off for dissolving their companies in order to avoid paying back money given to them via the government’s Bounce Back loan scheme, which offered small and medium businesses loans of up to £50,000.

The new powers give the Insolvency Service the right to ban individuals that dissolve companies in order to avoid paying back government backed loans, from acting as company directors for up to 15 years.

Lord Callanan said “We have been clear that we will not tolerate those who seek to defraud the taxpayer, which is why we introduced tough new powers which have allowed the Insolvency Service to disqualify three directors for dissolving their companies, to avoid repaying their bounce back loans.”

“The government provided unprecedented support to businesses to help them through the pandemic, but unfortunately a minority of people abused this support for personal gain.”