COVID Fraud Enforcement: Impact of the Latest Report on Company and Director Prosecutions

The publication of Tom Hayhoe’s final independent report, Pursuing Recoveries and Preventing Reoccurrence, was presented to Parliament on 9 December 2025.

The report lays bare the scale of losses arising from Covid support schemes and raises an important question for businesses and directors alike:

Will the report result in a new wave of prosecutions, or does it strengthen defence arguments for those under investigation?

Final Report of the Covid Counter Fraud Commissioner – GOV.UK

The report found pandemic support schemes such as Furlough, Bounce Back Loans and Eat Out to Help Out were rushed through without adequate fraud safeguards, resulting in a loss of £10.9 billion, due to fraud and error.

The report details that while £1.8bn worth of losses has been recovered, ‘much of the shortfall is now beyond recovery’.

The report calls for better fraud prevention across government bodies, improved preparedness for future crises and stronger cross-departmental controls to protect taxpayers in future emergencies.

Why are prosecutions likely to increase?

The report does not create new powers of enforcement but reinforces the priority to recover funds.

Despite recognising systematic flaws, the report calls for continued and enhanced recovery efforts. It states that ‘areas remain where investing in recovering money paid out incorrectly is worthwhile’ and that government departments should be ‘incentivised to maximise action to prevent and recover fraud’.

The closure of HMRC’s voluntary repayment window on 31 December 2025 is also significant. With the co-operative route now closed, unresolved cases are more likely to progress into formal investigations.

The Insolvency Service has been actively prosecuting individuals and companies for the misuse of the BBL scheme from February 2022. Since that time, up to December 2024 there have been 122 prosecutions by the IS, along with over 800 Directors Disqualifications.

It is expected that we will now see a renewed focus on prosecutions by the IS, National Crime Agency and other prosecuting authorities. The most common circumstances investigated are where

• There is evidence of personal benefit
• Funds were extracted shortly before insolvency
• Directors ignored opportunities to make repayments

How does the report strengthen defence and mitigation arguments?

While the report may drive further enforcement, it may also strengthen possible defence arguments and mitigation by highlighting systematic government failures.

Many criminal prosecutions rely on proving dishonesty and intent. The report accepts that schemes were not implemented with adequate checks. In circumstances where defendants can show they relied on unclear guidance or misunderstood the eligibility criteria, the report may provide support for arguments that their conduct was not deliberate or fraudulent.

The report may also be utilised to reduce culpability, contextualise behaviour within an unprecedent and chaotic regulatory environment, and strengthen arguments to suspend or avoid custodial sentences.

What can we do to assist you?

The implications of being prosecuted for Furlough or BBL Fraud can be far reaching for both companies and directors, including the following

• Reputational damage
• Significant financial penalties
• Criminal convictions and possible prison sentences
• Directors’ Disqualification for a period of 2 to 15 years
• Bankruptcy restrictions

Our specialist Regulatory and Corporate Defence (RCD) Team advises companies, directors and senior personnel who face investigation or prosecution for alleged COVID-related fraud.

The team regularly acts in matters involving the Insolvency Service, the National Crime Agency, police forces and other prosecuting authorities. Over time, it has developed a strong reputation for successfully defending allegations arising from pandemic support schemes.

Through early intervention and careful strategic decision-making, the team can often prevent charges from being brought or prosecutions from continuing.