But it is a last chance for directors to “come clean”

Many directors might have thought the news of a Covid Repayment Amnesty being announced last month was too good to be true. 

When HM Treasury unveiled the voluntary repayment scheme as a final opportunity for directors to address any outstanding Covid-19 support funds such as Bounce Back Loans, it certainly looked like it. 

However, a firm deadline and guidance from the IPA underlines that a good deal is only that – not a great one. 

Businesses have until Christmas Day – December 25th – to return funds from schemes such as the BBLS, CBILS or furlough payments, even if the money was wrongly claimed. 

Tom Hayhoe, the Covid Counter-Fraud Commissioner, put it quite bluntly: “Our message to those who still owe Covid era money is simple – pay now and clear your conscience or face the consequences.”

The Insolvency Practitioners Association (IPA) underlines this vital point directors need to be aware of – repaying the money does not guarantee protection from enforcement action. 

The Insolvency Service has confirmed that Insolvency Practitioners must continue to report director misconduct in the usual way, regardless of whether a repayment has been made through the scheme. This means the amnesty is a chance to mitigate a director’s position but is not a shield from investigation and any subsequent consequences.

Inaction is costly

Directors need to understand that on this occasion the government is not making empty threats. 

Once the window closes on Christmas Day, efforts to pursue outstanding debts will begin to intensify, backed by new and enhanced investigatory powers and additional staff. A new whistle-blowing website is also being launched to allow the public to anonymously report suspected Covid fraud.

With an estimated £1.88 billion in fraudulent Bounce Back Loan payments alone, HMRC has already begun to actively secure convictions, leading to director disqualifications and prison sentences for those who deliberately defrauded the system.

A critical distinction between deliberate fraud and genuine hardship

The government recognises that it’s important to distinguish between those who deliberately set out to defraud the system and the many directors who took out financial support in good faith to protect their businesses but are now, due to ongoing economic pressures, struggling to make repayments. 

The crackdown is squarely aimed at the former but if you are in the latter category, like the vast majority of directors in this position, then you have to understand that the pressure from lenders is only going to increase. 

Ignoring the situation is not a viable option and could lead to severe personal and professional consequences.

Chris Horner, insolvency director with BusinessRescueExpert, said: “Directors have until December 25th to use the voluntary repayment scheme and take advantage of the “no questions asked” approach. While it’s not a guarantee of immunity, it is the best route to demonstrate co-operation and protect yourself and your business from further action down the line. 

“If you’re struggling to repay Bounce Back Loan arrears or any other business debts, don’t hide or keep your fingers crossed that something will turn up. The pressure will only get worse. 

“Directors that are facing or already in an insolvency process need to act differently than those with Covid arrears but aren’t undergoing insolvency. They should not repay the lender directly through the scheme but should instead contact their appointed insolvency practitioner or the Official Receiver, if appointed, to arrange the repayment. This ensures that the process will be handled correctly within the insolvency framework.”

The clock is ticking down and the repayment scheme is a final warning. 

Whether you acted in error or are simply unable to pay, taking decisive action now is the only way to protect your position. 

Get in touch with us today to arrange a free consultation with an experienced advisor. 

They’ll work with you to provide a feasible path forward for you and your business that is efficient, effective and sustainable – but only after you take the first step and make contact first.