The consequences of misusing Government support schemes: A case study for accountants

The case of Belal Ahmed, former director of Bengal Tandoori Lichfield Limited, offers a crucial learning opportunity for accountants advising their clients on the proper use of government support schemes. Ahmed's fraudulent actions in both the Bounce Back Loan (BBL) and Eat Out to Help Out schemes resulted in significant legal consequences, highlighting the risks that company directors face when they engage in such misconduct.

Issues faced by the director

1. Fraudulent claims under Government schemes:

• Overstated turnover for Bounce Back Loan: Ahmed claimed his restaurant’s turnover was ￡420,000, securing the maximum ￡50,000 BBL. However, investigations revealed that the actual turnover was closer to ￡150,000, meaning the business was only eligible for a loan of around ￡37,500.
• False claims in Eat Out to Help Out scheme: Ahmed falsely claimed ￡56,500 under the Eat Out to Help Out scheme, vastly overstating the restaurant’s in-house sales. The analysis showed actual sales of just ￡8,055 for that month, indicating that at least ￡48,445 was claimed fraudulently.

2. Consequences and Penalties:

• Director disqualification: Ahmed received a 12-year disqualification, preventing him from being involved in the promotion, formation, or management of any company without court permission. This lengthy ban reflects the seriousness of his misconduct.
• Reputational damage: The public nature of such cases leads to significant reputational harm, making it difficult for Ahmed to engage in future business activities.
• Financial liabilities: Bengal Tandoori Lichfield Limited went into liquidation in June 2021, owing over ￡121,000 to creditors. The financial mismanagement, coupled with fraudulent claims, contributed to the company's collapse.

How accountants can help prevent such misconduct

For accountants in practice, this case highlights the critical role they play in advising clients on the correct and lawful use of government support schemes. Here’s how accountants can make a difference:

1. Rigorous review and compliance checks:

• Verify financial claims: Accountants should ensure that all financial claims made by their clients are accurate and reflect the true state of the business. This includes verifying turnover figures before applying for loans or grants.
• Monitor use of funds: After funds are secured, accountants should regularly review how the money is being used to ensure it aligns with the terms of the loan or grant. Misuse of funds should be flagged and corrected immediately.

2. Educating clients on legal responsibilities:

• Provide clear guidance: Accountants must educate their clients about the legal implications of fraudulent claims. Clients should understand that misleading the government or creditors can lead to severe legal consequences, including disqualification, financial penalties, and even imprisonment.
• Encourage transparency and cooperation: Clients should be advised to cooperate fully with any investigations by authorities such as the Insolvency Service. Full transparency can mitigate some of the potential consequences if issues arise.

3. Early intervention and strategic advice:

• Identify red flags: If an accountant notices any irregularities or potential fraud, they should address these issues immediately. Early intervention can prevent small problems from escalating into significant legal issues.
• Advise on corrective actions: In cases where mistakes have been made, accountants should guide their clients on how to rectify the situation before it leads to legal action. This might include repaying funds, amending claims, or voluntarily disclosing errors to the relevant authorities.

How AABRS can support accountants and their clients

AABRS provides essential support to accountants dealing with clients who may be at risk of, or already involved in, misuse of government support schemes:

1. Consultation and compliance support: AABRS can work with accountants to conduct thorough compliance checks on their clients’ financial statements and loan/grant applications. This proactive approach helps identify and correct any issues before they lead to legal action.
2. Insolvency and restructuring guidance: If a client’s business is facing financial difficulties or has already received government funds fraudulently, AABRS can provide expert advice on restructuring options or guide them through the insolvency process. This can help protect directors from further legal consequences and manage creditor relationships effectively.
3. Legal representation and mitigation strategies: For directors facing disqualification or other legal penalties, AABRS offers strategic advice and legal representation. Early involvement can help mitigate the severity of penalties and protect the director’s future business prospects.

Conclusion

Belal Ahmed’s case illustrates the serious repercussions of misusing government support schemes like the Bounce Back Loan and Eat Out to Help Out schemes. Accountants play a vital role in preventing such misconduct by providing accurate financial oversight and timely advice. By partnering with AABRS, accountants can ensure they offer comprehensive support to their clients, helping them navigate complex legal and financial challenges while avoiding the severe penalties associated with fraudulent activity. Early intervention and expert guidance are key to safeguarding both the financial health of the business and the professional future of its directors.

Source: Restaurant owner banned as company director after abusing Eat Out to Help Out Scheme - GOV.UK ( www.gov.uk )