Reporting mis-use of bounce back loans

Members will be aware of well publicised concern over mis-use of Covid financial support measures introduced by the government, including in respect of bounce back loans. Fraudulent or otherwise inappropriate applications for such funding have come under the scrutiny of the Insolvency Service, and we wish to remind insolvency practitioners of their duty to ensure that they investigate and report any concerns as appropriate.

The Insolvency Service advise that types of misconduct can include providing false information on the loan application, the loan being used for personal benefit and dissolving a company in order to avoid repaying a loan.

As a first step, an insolvency practitioner should seek to identify whether a loan received from a major bank is a bounce back loan.  Whilst it should be described as such in the company’s accounts, it may not necessarily have been appropriately categorised and therefore any loan within the relevant time frame should be checked. The Scheme was introduced in April 2020 and closed to new applications at the end of March 2021.

If it is established that the business received a bounce back loan, the insolvency practitioner should seek to obtain copies of relevant documentation, including the application for the loan. This should establish the information given by the applicant to demonstrate that the business met the qualifying criteria, for instance in respect of commencement of trading, turnover and the required declaration that the business was not insolvent on 31 December 2019. The insolvency practitioner should then take steps to verify that the information given on the application was correct.

There is concern that some businesses may have been in receipt of bounce back loans exceeding the £50,000 maximum, capped at 25 per cent of annual turnover. Insolvency practitioners should therefore be alert to, for instance, multiple loan applications having been made for the same business and applications by businesses which are not eligible as they were already in receipt of a Coronavirus Business Interruption Loan.

A further point to consider is the use of the funds received; the insolvency practitioner should review bank statements and company accounts to verify that they were used in the ordinary course of business and not for any inappropriate purpose. 

Members are reminded of their responsibilities to investigate companies in Administration or insolvent liquidation as set out in SIP 2, both for recovery purposes and as a matter of public policy.  If an insolvency practitioner has any concerns about how a bounce back loan was obtained or how the funds were used, they should be reported to the Insolvency Service. This would also apply to any suspected fraud in respect of other Covid financial support measures, including the furlough and Eat Out To Help Out schemes (EOTHO). The Furlough scheme ran from 20 April 2020 until 30 September 2021 (part-time employees from 1 July 2020). Fraud under the Furlough job retention scheme could be highlighted by clear evidence of any staff work that would help their employer make money or family members suddenly claiming employment. EOTHO subsidies required claimants to have a qualifying premises, where food could be consumed on site, and claimants were required to maintain daily records confirming the number of customers benefitting from the scheme and the value of every transaction. Abuse of this scheme might show as a lack of records or an imbalance relating to supplies.   

Insolvency practitioners should report suspected misconduct in respect of a Covid support scheme using the Director Conduct Reporting Service, in accordance with Dear IP issue number 157 (January 2023). Any concerns should be reported to the Insolvency Service by e-mail to, and insolvency practitioners should be aware that there will be additional reporting requirements depending on the nature of the issues found, which could include reporting to HMRC and/or via a SAR.