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Bounce Back Loan fraud – What sits under the ‘misuse’ umbrella?

A Guest Contributor: David Tattersall, Head of Client Relations, Handpicked Accountants (part of Begbies Traynor Group)

At the onset of the Covid-19 pandemic, the British government introduced a lifeline to businesses in the form of the Bounce Back Loan scheme.
While this route provided easy and immediate cash access to Covid-19 stricken businesses, the conditions under which these loans were granted were stringent, the key rule being that businesses must use a Bounce Back Loan to provide an economic benefit.
It is expected that of the £47 billion worth of Bounce Back Loans provided, £4.9 billion is likely to be lost to fraud.
What’s classed as Bounce Back Loan misuse and fraud?


  • It is suspected that of the £47 billion worth of Bounce Back Loans provided, £17 billion is already expected to be lost and £4.9 billion attributed to fraud
  • Bounce Back Loans were prescribed to provide an economic benefit
  • The government crackdown on Bounce Back Loan fraud involves prosecution and director disqualification
  • New powers have been granted to the Insolvency Service to restore dissolved companies where the company director is suspected of Bounce Back Loan fraud

£4.9 billion lost to Bounce Back Loan fraud

When Covid-19 was declared a pandemic in March 2020, the economy was overwhelmed with uncertainty as the first lockdown set into motion and businesses closed their doors to control the spread of the virus.

In a matter of weeks, the Bounce Back Loan scheme was introduced to provide financial fuel to businesses throughout the lockdown. While the scheme helped prevent a mass exodus of insolvencies, it was targeted by rogue company directors with hopes to exploit the government and take advantage of the vital aid put forward for financially starved businesses.

Over £47 billion worth of Bounce Back Loans were provided through the scheme, and it is suspected that £17 billion is already expected to be lost, with £4.9 billion of that which equates to over 10% of the loans – to fraud.

In light of the findings, legislation has been introduced to reprimand company directors who close a business to escape Bounce Back Loan repayments. Investigations are underway into hundreds of cases of suspected Bounce Back Loan fraud and arrests have already been made and publicised where evidence of BBL fraud has surfaced.

Covid-19 loans – what strings were attached?

According to the British Business Bank, at the time of submitting a BBL application, ‘the business must confirm to the lender that the loan will only be used to provide an economic benefit to the business, for example providing working capital, and not for personal purposes.’

If company directors are found guilty of bounce back loan fraud or misuse, they could face a fine or director disqualification on the back of an Insolvency Service investigation, as demonstrated in the first criminal prosecution case of BBL fraud.

The first successful criminal prosecution of a bounce bank loan fraudster saw a company director disqualified for 7 years.

An application to dissolve the company was signed, but the director applied for a Bounce Back Loan of £20,000 and failed to disclose to the bank that the company was undergoing dissolution. He signed the loan declaration which stated the company would be able to make repayments, however, when the loan was due to be repaid in June 2021, the company had been dissolved.

The director admitted to having no intention of using the Bounce Back Loan for the business when interviewed by Insolvency Service investigators. He claimed to give around £14,000 in cash to family abroad and used the remaining £6,000 to buy a car and insurance.

He pleaded guilty to charges of fraudulently claiming Covid-19 financial support to which he was not entitled contrary to the Companies Act 2006 and the Fraud Act 2006.

A new study carried out by insolvency practitioners, Real Business Rescue, found that hundreds of individuals used Bounce Back Loans for purposes other than to provide an economic benefit.

Shaun Barton, national online business operations director at Real Business Rescue, said:
“Examples of these include directors using the schemes to send bonuses and payments to themselves, in addition to non-employees like friends and family, put down deposits on houses, take flying lessons, buy luxury items such as new £50k cars, engagement rings, and jet skis, and even spending thousands on pornographic sites.”

Crackdown on Bounce Back Loan fraud

In light of the Bounce Back Loan scheme, a new measure was introduced as part of a crackdown on directors who dissolve companies to evade debts, including a Bounce Back Loan.

The new legislation extends the Insolvency Service’s powers to investigate and disqualify company directors who abuse the company dissolution process to avoid Bounce Back Loan repayments.

As the Bounce Back Loan Scheme gave lenders a 100% government-backed guarantee against the outstanding balance of the facility (both capital and interest), the government would be required to cover the remainder of the bill if a company becomes insolvent.

As such, the measure aims to deter directors that wish to escape their debts, and in turn – regulate the costs likely to be put forward to the government.


In the words of Business Secretary, Kwasi Kwarteng, the new powers will curb rogue directors who seek to avoid debt repayments which could leave the British taxpayer out of pocket., this includes vital government loans provided to support businesses and save jobs.

David Tattersall is Head of Client Relations at Handpicked Accountants, part of Begbies Traynor Group. The online directory, Handpicked Accountants, shortlists tried and tested accountancy providers across the UK to simplify the search for individuals and business owners looking for an accountant.

If you suspect somebody or a business of Bounce Back Loan misuse or fraud and need guidance on what to do next, please do not hesitate to get in touch at

Published on August 8, 2022

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