Bounce Back Loan Scheme Fraud Investigations
UK authorities are now conducting compliance checks and investigations to catch those who deliberately abused the Bounce Back Loan scheme (BBLS). The Bounce back loan scheme fraud investigations have started to crack down on businesses where it is felt the application was in fact incorrectly taken. Many individuals are now receiving letters from the bank that provided the bounce back loan as part of the early steps of an investigation.
If HMRC or your bank has contacted you in relation to potential fraud, or you are concerned that mistakes were made, please contact us at Altion Law. For those companies that are being investigated, we are also used to working with Accountants to assist with reducing the workload that these investigations can create.
We offer a free, confidential discussion with a staff member who is familiar with HMRC bounce back loan investigations to quickly understand the potential risks, both to the company and the directors personally.
Bounce Back Loan Scheme
The BBLS offered UK businesses who were losing revenue due to the Covid-19 pandemic a government-backed loan. Lenders could borrow up to £50,000 with a 2.5% interest rate. The initial loan term was six years but this can be extended to 10 years.
To be eligible for the BBLS, a business must have been:
- A UK limited company or partnership, or tax resident in the UK, that was actively carrying on business on 1 March 2020
- Have more than 50% of its income derived from its trading activity
- Using the loan for the economic benefit of the business and not for personal use
- Have not been in bankruptcy, debt restructuring proceedings or liquidation
- Have no breaches state aid restrictions
- Not use the facility for export-related activities if it was a ‘business in difficulty’ on 31 December 2019.
Bounce Back Loan Scheme Fraud
Due diligence checks were relaxed for the Bounce Back Loan scheme, with applicants asked to self-declare their eligibility. There are concerns this left the system open to abuse, potentially causing the taxpayer to lose billions of pounds.
Various UK authorities are now working together to recoup money that was wrongfully obtained. In particular, HMRC, the National Crime Agency, the National Investigation Service and banks are looking for anyone who:
- Deliberately abused the Bounce Back Loan scheme
- Gave advice as to how to abuse the Bounce Back Loan scheme
- Made false declarations to borrow more than they were eligible to
- Created bogus companies in order to submit a loan application
Those who are criminally prosecuted could face charges of fraud by false representation, false accounting and conspiracy to defraud. A civil investigation could lead to financial penalties, along with additional action taken against directors of companies.
Implications for Directors
There may be personal repercussions for directors who acted fraudulently, or who failed to properly dissolve a company which had an outstanding Bounce Back Loan. A director who did not discharge their duties properly could face allegations of unfit conduct, leading to director disqualification proceedings. Directors can be disqualified for anywhere between two and 15 years. Other penalties are also available, such as a Compensation Order.
Investigations and Compliance Checks
Any business who obtained a loan under the BBLS should prepare themselves for HMRC and Bank bounce back loan compliance checks and additional Bounce back loan scheme fraud investigations. This applies to a significant number of businesses across the country, considering that three Bounce Back Loans were issued every minute between May 2020 and March 2021.
If any evidence of wrongdoing is found, then further investigations will be conducted. Depending on the nature of the allegations, this will either be a civil investigation or a criminal investigation. HMRC and other UK authorities have widespread powers, including the ability to search your home and workplace, seize electronic devices, and make arrests.
We understand this will be particularly concerning for many small to medium sized businesses which borrowed under the scheme. This is particularly true for directors who have been forced to dissolve the company since taking out a Bounce Back Loan, as their conduct will be under scrutiny.
Get Expert Legal Advice
If your business falls under suspicion, or you have received a letter from your bank questioning the original application figures or are concerned that errors have been made, we recommend that you speak to our solicitors without delay. We specialise in HMRC investigations, compliance and regulatory matters, and director disqualification. We can discuss your case with you and determine the best way forward.