London: A British-Indian businessman has been sentenced to six months in prison, suspended for 18 months, after admitting abuse of an interest-free loan offered by the UK government to businesses to cope with the Covid-19 lockdown.

Rajesh Dhirajlal Vaghela, 46, from Stanmore, who had received a 25,000-pound loan before closing his business in an effort to avoid repaying the taxpayer loan, pleaded guilty to fraud by abusing the Bounce Back Loan scheme.

He was caught through new powers granted to the Insolvency Service in December 2021, which allow it to investigate directors of dissolved companies who are suspected of closing their business to avoid repaying Covid-19 support loans. Vaghela, who was a director of RKV Consultancy Ltd, which had traded as a consulting firm from Stanmore since its incorporation in March 2019, applied for a 25,000 pound Bounce Back Loan from his bank on behalf of the consultancy in May 2020.

The loan was paid into the company’s bank account but within a week of receiving the money, Vaghela filed paperwork with Companies House to have the business dissolved, and later transferred all the loan money to personal bank accounts.

The striking-off application to dissolve a company makes clear that creditors, such as a bank with an outstanding loan, should be notified within seven days of applying to close the business and that failure to notify interested parties is a criminal offence.

After RKV Consultancy Ltd was dissolved, in October 2020, the Insolvency Service and cross-government counter-fraud systems identified its closure as probable Bounce Back Loan fraud. Investigators found that Vaghela had not informed his bank of his application to dissolve the consultancy -- a breach of the law.

“Directors who abused the Covid-19 financial support schemes, which were provided by the government to support genuine businesses in need of help during the pandemic, have exploited taxpayers,” Peter Fulham, Chief Investigator of the Insolvency Service’s Criminal Investigation Team, said in a statement.

“This sentence reflects the thoroughly dishonest conduct of Rajesh Vaghela and should serve as a warning to others who engaged in this behaviour that they are at risk of criminal prosecutions and could potentially end up in prison,” Fulham added.