HMRC Bounce Back Loan Investigation

Introduced by the government in April 2020, the Bounce Back Loan Scheme (BBLS) provided rapid access to finance for small businesses affected by the coronavirus pandemic. Through the scheme, SMEs could borrow between £2,000 and 25% of their turnover, up to a maximum of £50,000.

While businesses took advantage of the BBLS, it wasn’t without controversy. In June 2021, it was revealed that basic fraud checks were disregarded in the rush to ensure vulnerable businesses were protected at the start of the pandemic. As a result, the scheme was open to fraud, defaults, and error. Nearly half of the loans taken out won’t be repaid, and because they are government-backed, the taxpayer is left picking up the tab.

HMRC is now investigating which businesses deliberately abused the BBLS. Cracking down on those guilty, the repercussions for directors who acted fraudulently are severe. Bankruptcy restrictions and director disqualification undertakings have already been issued against some UK businesses.

If you have received a letter informing you that an investigation is underway, and you are concerned that a mistake may have been made, we can help. Contact our Director Disqualification lawyers today for a free initial consultation to discuss your case.


For many businesses, the BBLS offered an essential lifeline. According to the British Business Bank, initial analysis shows that up to 500,000 businesses could have permanently ceased trading in 2020 alone if the scheme had not been in place.

Today, the government is working with the National Investigation Service (NATIS) and the Insolvency Service (IS) to investigate instances of fraud and, where appropriate, recover fraudulent loans and penalise guilty parties.

Here are some key stats:

  • During its tenure, almost 1.56 million businesses were approved for finance.
  • A cumulative value of around £47.4 billion was provided via the BBLS.
  • Some £17 billion won’t be repaid due to fraud and defaults.
  • NATIS has opened 273 investigations into BBLS fraud with a total value of £160 million (Sept 2022).
  • 78 suspects have been dealt with, and 49 arrests have been made (Sept 2022).
  • The Insolvency Service had issued 242 director disqualifications, 101 bankruptcy restrictions and one criminal prosecution for BBLS fraud (Sept 2022).


There are different types of BBLS misuse. In many cases, fraud occurred where the money supplied was used for personal use rather than to support the business. For example, where:

  • Funds were used to purchase personal assets.
  • A lump sum was transferred to a personal bank account.
  • Some or all of the money was given to a friend, family member, or another third party.
  • The money funded a substantial increase in directors’ salaries or dividends.

BBLS fraud also occurred when a director:

  • Exaggerated turnover to obtain funds.
  • Did not disclose the company was in financial difficulty when applying for the loan.
  • Dissolved the business in an attempt to avoid repaying the loan.

Other examples of BBL fraud are where criminals:

  • Made multiple or fake applications for loans.
  • Created a new company or acquired a shelf company to make a fraudulent application.

What is Bounce Back Loan fraud?

BBLS fraud happened when someone deliberately applied for a loan they were not entitled to or where they used the money in a way that did not meet the purpose of the loan (e.g. to buy personal assets). However, some directors are facing BBL fraud investigations due to honest mistakes made when applying for the loan (either by themselves or someone else in the business).

Can I use Bounce Back Loans for personal use?

No. Bounce Back Loans were made on the condition the recipients did not use them for personal purposes. However, you could use a BBL to purchase assets that would benefit the business (e.g. a vehicle).

Can a director be disqualified for BBL misuse?​

Yes, if found guilty of misusing BBL funds, directors may be held personally liable. As well as being made to repay the outstanding balance, they could face other penalties, fines, and director disqualification of between 2 and 15 years.

What if I’m unable to meet Bounce Back Loan repayments?​

If you miss loan repayments or your business enters liquidation or administration, you will likely face an investigation over the use of the loan. In such cases, directors must demonstrate that the bounce back loan was acquired legitimately and used for the economic benefit of the business. Directors struggling to meet BBL repayments must take legal advice as soon as possible.


Whether you are the director of a going concern, are in financial difficulty, or have dissolved your company since taking out a Bounce Back Loan, being the subject of an investigation can be stressful and disturbing.

Madison legal, insolvency solicitors are experts in defending director disqualification claims – including in cases of suspected BBL fraud. In many cases, we have successfully persuaded the Insolvency Service to withdraw proceedings. Bounce Back Loan fraud charges could result in serious personal consequences. 

Please do not hesitate to contact us for advice, send us an e-mail. Alternatively, contact us via LinkedIn.


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