Sharp increase in directors banned for Covid fraud
The Insolvency Service is now banning, on average, 35 directors per month for Covid Support Scheme abuse, almost treble the 12 per month banned in the previous year*, shows new data from Mazars, the international tax, audit and advisory firm.
In the nine months of the 2022/23 year to date (April 1 – December 31 2022), 312 company directors were banned from running businesses for abuse of Covid support schemes, compared to 141 in the whole year from April 1 2021 to March 31 2022.
Over the same period, the average length of director bans has also increased by 22%, from 5.9 years to 7.2 years. Directors disqualified (ie prevented from taking the role of a director) in December 2022 received bans of eight years on average.
The increase in the number of director disqualifications, combined with longer bans, suggests that the Insolvency Service is accelerating its enforcement activity in relation to Covid fraud.
Michael Pallott, partner and head of contentious insolvency at Mazars says: “The Insolvency Service has stepped up a gear in its pursuit and punishment of those directors responsible for Covid fraud. That’s something that all taxpayers will be pleased to see.”
“Without tough action from the Insolvency Service and other enforcement agencies there will be little to deter directors from continuing to abuse the system.”
“The harsher penalties for directors seen over recent months suggest that the Insolvency Service is looking to send a clear message to directors who misused taxpayers’ money during the pandemic.”
“Directors are far more likely to commit financial misconduct during times of economic stress, when the survival of their business may be at stake. However, this does not excuse fraudulent activity, which many directors who bent the rules during the pandemic are now finding out to their cost.”
“Directors who are concerned that they may have broken any rules relating to Covid support schemes would be best advised to come forward as soon as possible, as it’s always better to be upfront about potential misconduct rather than to be found out.”
*Year ending March 31 2022