Insolvency service crackdown on Bounce Back Loan abuses

In the past year, over 1,000 business directors have been disqualified following investigations by the Insolvency Service. 

They were banned for over eight years on average, over three quarters for Covid loan abuse – mainly Bounce Back Loans. 

The figures for the financial year from 2024/25 showed that 1,036 directors in all were disqualified, 736 for Covid loan abuse. The figure was lower than the previous year when 1,222 directors were disqualified. 

Additionally 131 bankruptcy restriction orders were put in place, 87 of them related to the abuse of Covid loans. 

Dave Magrath, Director of Investigation and Enforcement Services at the Insolvency Service said: “Disqualifications for more than one thousand directors demonstrates the impact our investigative work is having. 

“Whether it be Covid loan abuse or directors breaching disqualification restrictions, we are consistently tackling misconduct and bringing those responsible to account. 

“The end result is a reminder to all businesses to operate appropriately, within the law, and to help to protect the public from rogue businesses and their directors.”

Directors can be banned from being the director of company for several actions including:

  • Failure to maintain adequate accounting records
  • Not paying tax or VAT that is legally owed to HMRC
  • Obtaining a Bounce Back Loan or other Covid support loan they were not entitled to

Directors can be disqualified for a maximum of up to 15 years. During this time they cannot act as a director of any company in the UK, or an overseas company which has connections with the UK nor can they be involved in forming, promoting or running a company. 

Breaking the terms of a disqualification can result in a fine or even a prison sentence of up to two years.

Bankruptcies already place restrictions on what a person can do financially for a set period. If a person is dishonest or is found to be responsible for being unable to pay their debts, the court can make a bankruptcy restrictions order (BRO) which would further extend this period of restrictions for between two to 15 years and be subject to further restrictions.

We’ve written previously about how directors should be careful they don’t inadvertently “sleepwalk” their way into disqualifications in 2025 and 2026 and this advice remains pertinent. 

Many companies are struggling to meet all of their financial obligations including Bounce Back Loan repayments and this month they had more considerations to balance with rises in the National Minimum Wage and Employers’ National Insurance Contributions to fund. 

Chris Horner, Insolvency Director with BusinessRescueExpert, said: “One of the things we’ve definitely noticed this year is that the Insolvency Service are recommending a higher proportion of their cases for disqualifications – especially where Covid related loans are involved. 

“Many directors are happy to see action taken against the deliberately dishonest people who applied for Bounce Back Loans when they knew they were ineligible. Successful action against them not only enhances compensation rates for creditors and the public and also acts as a deterrent in future. 

“But directors and business owners who do the right thing and are struggling to keep up repayments on Bounce Back Loans or other commitments do have some options. 

“They can consider options such as administration or a company voluntary arrangement (CVA) that will halt legal actions while the business explores restructuring opportunities. 

“This will allow them valuable time to explore their choices including potentially considering an orderly voluntary liquidation if the situation is unrecoverable.

“No matter what situation your business is facing – get in touch with us for a free, initial chat. Once we get a clearer picture of your unique circumstances, we’ll be able to give you some impartial, professional, practical advice on what you can do to improve your prospects.”