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The number of criminal prosecutions of directors following investigations by the Insolvency Service has dropped by 42% in the year ending 31 March 2023, from 134 in 2021/22 to 72, according to Mazars.
This fall in prosecutions comes despite the boom in fraud by directors during the pandemic, which saw large scale fraud committed against Covid support programmes including the Bounce Back Loan Scheme (BBLS), the furlough scheme and ‘Eat Out to Help Out’.
Shadow Chancellor Rachel Reeves recently announced that a Labour government would increase the pursuit of Covid fraud through a new ‘Covid Corruption Commissioner’, aimed at recouping taxpayers’ money that was previously lost to fraud and flawed contracts.
HMRC estimates that a total of £5bn has been lost through the Covid support schemes through fraud and error.
However, so far the recovery of this defrauded money and prosecutions of the directors responsible for these frauds has been very low.
Michael Pallott, partner at Mazars, said: “The clock is ticking to pursue directors that have fraudulently claimed Covid support. The longer it takes for investigations to start, the harder it is to trace and recoup the funds.
“It is likely that the Insolvency Service is already under resource constraints due to increasing insolvency numbers throughout 2023. Therefore, the ability to utilise external insolvency practitioners should be considered, as we all have the common goal of returning funds to creditors and tackling fraud head-on.”
