There has been a huge rise in HMRC Bounce Back Loan Investigations, which begs the question of how successful the Bounce Back Loan scheme has been in actually helping businesses.
During the pandemic, nearly £80 billion was loaned to businesses through the Bounce Back Loan scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme.
Now that businesses are struggling to pay back the loans and with the discovery of more cases of wrongdoing HMRC are investigating more and more cases of Bounce Back Loan fraud.
As a business owner, it’s important to stay informed about the financial health of the companies you deal with. One tool that can help you do this is the Insolvency Register.
In this article, we’ll explain what the Insolvency Register is, why it’s important for your business, and how you can use it to protect your interests.
Bounce Back Loan Fraud
The insolvency service is regularly publishing instances of Bounce Back Loan fraud where prosecution has occurred. Many of these have resulted in director bans and even suspended prison sentences in extreme cases.
As of 31st July 2022 there was £1.1 billion of loans drawn flagged as suspected Bounce Back Loan fraud.
In addition, up to March 2022, there was estimated to be £3.5 billion worth of losses from Bounce Back Loan fraud. With many believing these losses to be much higher.
As a result, the Government announced an additional £48.8 million of funding to tackle public sector fraud over a period of 3 years.
Bounce Back Loan wrong turnover
There have been a number of cases where businesses applied for the Bounce Back loans and stated the wrong company turnover on their applications.
In many of these cases the directors fraudulently claimed their annual company turnover was in excess of £250,000 in order to claim the maximum £50,000 loan amount.
These loans were granted with little or no credit checks at the time of application. Borrowers only had to self-certify they were based in the UK, trading, affected by the Coronavirus pandemic and not insolvent.
Loans often appeared in accounts within a few hours.
It’s recently also become apparent that many Bounce Back Loans were made to businesses that had never traded, were dissolved or were used to support other businesses.
What’s next with the HMRC Bounce Back Loan Investigation?
The sharp rise in the number of cases of HMRC Bounce Back Loan Investigation is a direct response to the number of instances of Bounce Back Loan fraud being uncovered.
The ease of access to the loans and desperation of certain company directors were undoubtedly contributory factors to the high number of fraudulent claims.
What’s certain is there are many more cases yet to be investigated and the cost of Bounce Back Loan fraud will rise.
There are however many directors who have acted within the law but are still having problems trying to pay the Bounce Back Loan back. This adds strength to the argument the Government scheme has actually made the situation worse.
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