Insolvency practitioners instructed to report Covid-19 fraud
Insolvency practitioners have been told its their duty to report fraudulent applications for Covid-19 loan schemes to the government.
This comes as lenders are expected to see defaults and fraud from the schemes, which include the coronavirus business interruption loan scheme, coronavirus large business interruption and bounce back loan scheme (BBLS).
Read more: Three people arrested after being accused of bounce back loan fraud
The Office for Budget Responsibility has predicted taxpayers could be left with a £29.5bn bill from bad debts caused by defaults in the government’s emergency lending schemes
The National Audit Office warned there is a “very high level” of fraud risk among BBLS borrowers which could result in government losses of between £15bn and £26bn.
Similarly, a report from the Recapitalisation Group, EY and lobby group TheCityUK has forecasted that up to £36bn worth of government-backed business loans could become toxic by March of next year.
“In our regular bulletin to insolvency practitioners, we reminded them of their duties to report to us, and how to do so, any suspected fraudulent activity they may identify in their Director Conduct Reports on insolvent companies which includes those involving Covid-19 government financial support schemes,” said a spokesperson from the Insolvency Service.
“I haven’t seen any fraud personally or professionally to report at this point in time but its early days,” said Frank Wessely, partner at insolvency advisory firm Quantuma.
“We have duties anyway whether the pandemic has arisen or not and we’ll be keeping an eye out for that out of thing.
“It’s understandable HMRC are looking to see what insolvency practitioners can do.”
Read more: Bounce back loan fraud impacts car finance industry
The warning to insolvency practitioners follows the Treasury confirming to lenders last month that it is that it is their responsibility, not that of government, to recover debts under the Covid-19 loan schemes.
The Treasury is reportedly working with banking trade body UK Finance to develop a standard framework for dealing with BBLS borrowers that are finding it difficult to make repayments.
According to the latest figures from the Treasury, almost £65.5bn has been delivered to businesses through the Covid-19 support schemes, as of 16 November.
The government schemes are expected to close to applications at the end of January and be replaced by a successor scheme next year.
