Pinsent Masons said 140 directors were banned in the year to 31 March 2022, with another 37 banned in April and May 2022 alone.
The law firm said the Insolvency Service is now picking up the pace in investigating and banning directors as more cases are uncovered.
Andrew Sackey, Partner at Pinsent Masons, said: “As the authorities sift through huge volumes of data, regulators are cracking down heavily on indicators of Covid-related fraud.”
“Directors who abused Covid support schemes need to carefully consider their options. Often, self-reporting is the best way to mitigate the risk of custodial outcomes.”
Between 1 March 2020 and 31 December 2021, the Government gave out a total of £79.3bn in assistance to businesses. Pinsent Masons said the necessary speed with which Government support was given, with lighter than normal due diligence checks, was crucial to help companies survive the pandemic.
However, Pinsent Masons added that, now that we are moving beyond the pandemic, authorities are ramping up enforcement action against company directors who misused Covid support schemes.
Fraudulent claims on the Government’s coronavirus support schemes have cost the taxpayer at least £5 billion, according to HMRC.
Fraudulent activity during the pandemic included some directors setting up new companies to claim Covid bounce back loans, as well as companies vastly inflating their revenue to increase the size of loans they received. Other fraudulent activity included abuse of the furlough scheme. This included employers pretending to furlough workers by making claims under the scheme without furloughing staff, making claims for non-existent employees or misrepresenting hours worked to claim as much as possible.
Andrew Sackey added: “Authorities like HMRC and the Insolvency Service are now hunting down those who made fraudulent claims. There will be a wave of civil and criminal penalties, including prison sentences.”
“The Treasury has already clawed back hundreds of millions from fraudulent or erroneous Covid claims and several arrests have been made, but this is just the beginning. The Government expects to recover billions in the next 12 months. It is taking action on multiple fronts to crack down on fraudsters and bring them to justice.”