Crooked businessmen have been caught offering to sell dormant companies in the full knowledge that they will be used to make fraudulent claims for coronavirus loans.
The Mail on Sunday today exposes the scam, which allows con artists to use the companies as a front to claim money under the Government’s Bounce Back Loan Scheme, then close the firms and vanish.
It is feared the fraud could cost taxpayers billions of pounds at a time when millions of families face financial hardship.
Under Chancellor Rishi Sunak’s scheme, firms can borrow up to £50,000 interest-free for 12 months, with the loan guaranteed by the Government.
It has been a lifeline for small firms, but also provided rich pickings for fraudsters who disappear, leaving the taxpayer to reimburse banks.
‘THE BOSS’: Shehroz Mukhtiar (pictured), who runs a printing business in Luton, told how dormant firms could claim loans
To make a successful application under the scheme, fraudsters have to convince a lender that their company was registered before last April and is still operating.
That has created a lucrative market in dormant firms. A search for ‘limited companies for sale’ on eBay and Gumtree brought up dozens of firms for sale at prices from £900 to £9,000. Some stated that ‘no BBLS [Bounce Back Loan Scheme] has been taken’ – a signal that such a loan could still be sought.
Posing as a potential buyer, an undercover reporter contacted a trader on eBay who was offering two companies, each with ‘No debs/no loans/no BBLS’. The seller gave his name as Shehroz Mukhtiar and when asked if he would sell one of the firms, he breezily replied: ‘Is it for bounce back purposes?’
Told that it was, he explained that he had a dormant company called Bexetex Ltd which was set up in 2014 and available for a cut-price £1,000 because it didn’t have a business bank account.
Despite it being obvious to him that any BBLS claim using the firm would be fraudulent, he offered advice on how to apply. ‘Make the accounts for dormant companies and then apply… That’s the only option left, otherwise it’s hard, if you don’t have the bank account.’
The 30-year-old had advertised another company, Healthenviro Ltd, which did have a business bank account, for £9,000. But he said he had sold it two days earlier.
Under Chancellor Rishi Sunak’s (pictured) scheme, firms can borrow up to £50,000 interest-free for 12 months, with the loan guaranteed by the Government
Mr Mukhtiar agreed he would make the buyer a director of the firm as soon as he was paid. He also offered to backdate the appointment to last March. By doing so, he said there would be less chance of the bank suspecting fraud. ‘If you are looking for bounce back, you have to backdate it. If it’s not backdated, the banks will decline it… I’ve done that for a few customers.’
He claimed to have sold several firms to people intending to submit loan claims. According to Companies House, he has resigned as a director of ten firms since September.
Once we agreed a deal, Mr Mukhtiar, who runs a printing business in Luton, sent his bank details and a contract. But instead of a deal, Mr Mukhtiar received a call from The Mail on Sunday asking him to explain his conduct.
He hung up but later sent a message on WhatsApp, stating: ‘I am not involved in BBLS fraud. I have not applied for BBLS on your behalf. What you do after the purchase of the company only you are liable for, per the contract. Dormant companies were being sold prior to BBLS in good faith. Should you have applied for BBLS, it would be for you to honour the terms.’
On Gumtree, another trader called Arafat was offering six firms – some with existing business bank accounts – for £1,100 to £6,000.
He told our undercover reporter: ‘Just to be straightforward, are you buying this company for bounce back loans?’ When the journalist said that he was, Arafat replied: ‘Yeah, that’s the demand these days. It’s best to be straightforward.’
He added: ‘After you buy the company, it’s nothing to do with me anyway, I don’t really care. The procedure would be that I have to get a scanned copy of your ID and after you send me that, you bank transfer a payment.
‘Then I can give you an authentication code of the company and you can make the changes with Companies House, or I can make the changes for you, if you give me the new director’s details.’
He claimed he could organise an accountancy firm to provide fake invoices to help set up a business bank account. ‘They [the bank] ask for invoices and accountants’ letter. Obviously, you are not going to have invoices, so I can make them for you, and make the letter from the accountants,’ he said.
Arafat boasted of how he and an accountant set up 50 companies in 2019 and have sold most of them during the pandemic – potentially raking in hundreds of thousands of pounds.
‘We sold the majority of them, some of them got bounce back loans… companies with bank accounts are going for ridiculous amounts of money,’ he bragged.
But when this newspaper later confronted him about his business activities, he said: ‘My response is, I have no comment, I was just selling… This is not me, I don’t know what you are talking about. Please don’t call this number.’
Gumtree last night said it had removed Arafat’s adverts and closed down his account, saying it ‘does not tolerate fraud’.
The National Audit Office has warned that £26 billion of the £43 billion so far dished out under BBLS may be lost to fraud and defaults.
Last night, a Treasury spokesman said: ‘Government loan schemes have provided a lifeline to thousands of businesses. We targeted this support as quickly as possible and we won’t apologise for this.
‘We’ve looked to minimise fraud with lenders implementing a range of protections. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.’