The Rise in Compulsory Liquidations Is a Warning Not to Ignore HMRCPosted: Aug 21, 2025

Company insolvencies are still rising. Yes, times are tough in general, but there has also been a notable rise in compulsory liquidations from HM Revenue & Customs (HMRC)

Are HMRC really taking a more assertive approach to collecting unpaid taxes?

Recent figures from the UK Insolvency Service paint a rather bleak picture for struggling businesses. According to the most recent (as time of writing) data, July 2025 saw 339 companies forced into compulsory liquidation. To get some perspective on the importance of that number, it is an increase of 26% above the monthly average for 2024 and an 11% rise year-on-year.

It’s pretty hard and rather sad reading, but it should serve as a serious warning for company directors who are falling behind on their tax obligations. Many of these liquidations were at least partially a result of ignoring HMRC. So, are they taking a more assertive approach? Well, yes, it looks very much like it, and it could ultimately result in the forced closure of your business if you get things wrong.

HMRC are not playing around with overdue tax

Compulsory liquidation, for the benefit of clarity, is where a creditor, often HMRC, petitions the courts to wind up a company due to unpaid debts. It’s probably fair to say that it is the most severe form of enforcement action available when it comes to a limited company. HMRC currently seems to be not only using compulsory liquidation more freely, but it is also taking a more aggressive stance when it comes to enforcement.

Not only do the national figures reflect HMRC's approach, but on a more personal level, we are seeing it in action. At Smart Business Recovery, we have seen a very clear increase in enquiries from company directors who are facing direct contact from HMRC.

What happens when HMRC are due unpaid tax?

Well, there is never a single, easy response to that question. As always, we can’t cover every possibility in one small article, so this is just general advice. The process will vary depending on variables like the size and age of the debt, the company involved, whether there are other extenuating circumstances and so on. However, the process towards Compulsory Liquidation will often begin with a visit from a field officer. If they are not satisfied after that visit, the process will continue, and usually that will mean the inevitable escalation to the final stages and compulsory liquidation.

Company directors are then in a position where they are feeling the financial impact of this enforcement. That then adds to the pressure on businesses financially, which are clearly already navigating a few challenges.

Do businesses recover from this position? Yes, some do, but many don’t, and the next step is compulsory liquidation.

Why you should never ignore HMRC

We get it. We understand and we have empathy with your situation, but whether you like it or not, HMRC are not to be ignored. Unfortunately, when the cash flow is unreliable and costs are rising, many businesses struggle to keep pace with tax payments. The temptation is to prioritise who gets paid and when. HMRC are not as vocal about payment as some creditors, and they can feel less urgent. So, PAYE, VAT and Corporation Tax are easy to push down the priority order. The problem is that when a business is facing financial difficulties, the tax can be pushed one step too far very easily, and enforcement begins.

When HMRC begins enforcement, it won’t back down or go easy unless it has a clear and credible reason to do so. So, if you so fall behind on your tax obligations, the worst course of action is to ignore the issue. In fact, we regularly assist companies that believed they could manage the problem themselves, only to end up facing winding-up petitions faster than they expected after a final contact from HMRC.

So, what we are saying here is don’t wait. Do something immediately when you see a problem coming.

Here’s why immediate action is vital:

• HMRC is the most common petitioner in compulsory liquidation cases.
• Once a winding-up petition is served, it becomes a matter of public record, potentially damaging your business's reputation and relationships.
• If the court grants a winding-up order, your company ceases to trade, and all assets are handed over to the Official Receiver or an appointed liquidator.

Once it starts, compulsory liquidation is fast, and its effects are very final.

Who and what are the HMRC field officers?

HMRC field officers are enforcement agents who will visit businesses in person when tax debts remain unpaid. Their role is to collect outstanding tax, such as VAT, PAYE, or Corporation Tax. They will usually initially want to either secure immediate payment or, failing that, they may agree a formal ‘Time to Pay’ arrangement. A visit from a field officer is a real escalation from HMRC and often means that previous reminders and warnings have been ignored or not answered satisfactorily. If the officer cannot arrange payment, they can potentially take control of assets, but even if that doesn’t happen, it almost certainly precedes more serious enforcement actions such as a winding-up petition. In short, if you get a visit, you have a real financial problem, so wherever possible, avoid that situation.

What should you do if you are behind with HMRC?

If your business is behind on tax payments or you have been visited by an HMRC field officer, the best response is to act. Don’t delay; that will only make things worse.

There are some first steps you can take to protect your company:

Contact HMRC: They may be open to a Time to Pay arrangement, allowing you to settle your tax debts in instalments over a defined period. These arrangements are more likely to be granted if you act before enforcement begins.

Speak to us: As specialists in insolvency and corporate recovery, we can potentially help you to:

• Negotiate with HMRC on your behalf.
• Assess whether your business can be rescued or restructured.
• Explore formal solutions like Company Voluntary Arrangements (CVAs) or administration, where appropriate.

We understand the stress and uncertainty involved when dealing with tax arrears and HMRC pressure. Our team is experienced in working quickly and discreetly to find the best solution for your situation with empathy and honest, open discussions of what your options are.

Don’t leave it too late.

The key takeaway from the in compulsory liquidations seems to be a very clear and perhaps a little worrying one. HMRC is acting more swiftly and decisively than before. That means that if you're receiving payment demands or field visits, your business may already be in the early stages of enforcement.

Acting quickly can mean the difference between saving your business or at least controlling your own path through insolvency or other arrangements to get the best result possible, or a facing a winding up order from HMRC.

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