More than one in three UK company directors disqualified over a two-month period had abused the government’s coronavirus loan or job support schemes, according to an analysis of official data.
The Insolvency Service banned 37 directors in April and May for fraudulent claims. The disqualifications represented almost 35 per cent of the directors struck off and compares with 140 directors who were banned for abuse of Covid schemes in the year to the end of March: 17 per cent of the total.
Andrew Sackey, partner at the law firm Pinsent Masons, which analysed the official figures, said that as the authorities “sift through huge volumes of data, regulators are cracking down heavily on indicators of Covid-related fraud”. He added: “There will be a wave of civil and criminal penalties, including prison sentences.”
Business briefingIn-depth analysis and comment on the latest financial and economic news from our award-winning Business teams.One-click sign up.
A ban is one of the lighter punishments company directors can face, Pinsent Masons said, adding that those convicted of fraud faced custodial sentences and potentially being made personally liable for debts of the company.
The government issued £79.3 billion in assistance to businesses between March 2020, as Covid-19 took hold, and the end of last year. Fraudulent claims on the coronavirus support schemes have cost at least £5 billion, according to HM Revenue & Customs.
The government’s determination to provide aid as quickly as possible to protect jobs, companies and the economy meant that due diligence and checks were lighter than usual.
Fraudulent activity during the pandemic included some directors setting up new companies to claim Covid loans under the so-called Bounce Back Loan scheme and companies inflating their revenue to increase the size of loans they received.
Abuse of the furlough scheme included employers making claims under the scheme without furloughing staff, making claims for non-existent employees or misrepresenting hours worked to claim as much as possible, the law firm said.
The Insolvency Service announced the disqualification for 12 years of a director from Birmingham in June last year after he fraudulently claimed £50,000 through the Bounce Back Loan scheme before transferring the money from the company’s account to himself days before his company went into administration.