Billions of pounds worth of Covid loans were fraudulently used to make non-business purchases such as houses, cars, engagement rings and pornography.
According to a new study by insolvency practitioner Real Business Rescue, thousands of business owners misused the proceeds of the bounce back loan scheme (BBLS) and coronavirus business interruption loan scheme (CBILS) to make personal purchases.
“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,” the company said.
Real Business Rescue spoke to more than 50 insolvency practitioners who have dealt with thousands of director-led liquidations over the past 12 months, in an effort to learn how BBLS and CBILS funds have been misappropriated.
“Whilst the majority were taken out in good faith to help withstand the effects of the pandemic, our investigation shows that – sadly – in some cases, these loans designed to keep businesses going, and people employed, have been grossly misused,” said Shaun Barton, national online business operations director at Real Business Rescue.
“At a time where so many businesses are genuinely struggling, and the rising cost of living continues to cause concern for people up and down the country, it is shocking to see billions of pounds in taxpayers’ money lost in the abyss of misuse, negligence, and fraud.”
Barton warned that if a liquidator uncovers fraud or misuse of bounce back loans or the CBILS, they will look to recover the loan from the director. The director may then face a heavy fine and possible disqualification from the Insolvency Service.
A recent report from the government estimated a fraud rate of 11.1 per cent for the BBLS.
Meanwhile, UK banks and other lenders have lost more than £240m worth of guarantees due to mistakes made while distributing government-backed loan schemes during the pandemic.