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For context, the numbers speak for themselves. HMRC reportedly presented 4,761 winding-up petitions against businesses with unpaid tax debts last year. That was a 31% increase from 3,625 the year before. Of those petitions, 2,397 progressed to winding-up orders, forcing the companies concerned into compulsory liquidation.
Looking at the enquiries coming in, it is clear that there has been a noticeable upturn in enquiries from directors facing HMRC pressure. By pressure, we mean that, as well as the businesses dealing with demands for payment, they are also dealing with enforcement visits and winding-up action.
HMRC’s own figures show that overdue tax debt stood at £42.8 billion at the end of the 2024/25 financial year.
That is not a situation that we expected them to tolerate and, sure enough, they have evidently decided not to.
The department has also now received funding for an additional 2,400 tax debt officers, who will be used both to arrange payment plans as well as take enforcement action where they deem it necessary and, presumably, practical. It is hardly a surprise that this is happening because HMRC’s published roadmap makes it clear that reducing outstanding tax debt is now a priority.
All this also points to the increase in winding-up petitions being unlikely to be a temporary spike. If HMRC is being given more resources, better data and a clear instruction to recover more of the money it is owed, it would be naive to think they are not going to use those resources.
In short, if you owe HMRC money, they are coming for it.
The directors approaching us are not running deliberately non-compliant businesses. They are mostly just trying to manage cash flow while dealing with higher employment costs, borrowing costs, tax liabilities and difficult trading conditions.
The problems often start because using VAT, PAYE or Corporation Tax to support short-term cash flow seems an easy option. It isn’t, and it’s a potential bear trap. Although it allows access to cash, it also encourages arrears to accumulate, and once arrears start to build, they do so remarkably quickly. Formal action can then begin with surprising speed.
Unfortunately, the real world truth is that once HMRC begins formal enforcement, the time and options available to a director can narrow rapidly. While I suppose it is only fair to say that a winding-up petition does not necessarily mean that nothing can be done, it is a very serious escalation. Again, our decades of real world experience tell us that Directors need to accept that insolvency is by far the most likely outcome when things reach the stage of formal action.
The earlier a director seeks advice, though, the more opportunity there may be to assess whether the business can be rescued, negotiate a workable solution or at least retain some control over how the company is closed.
When we published The Rise in Compulsory Liquidations Is a Warning Not to Ignore HMRC, our central message was simple: HMRC pressure should never be ignored.
The latest figures, and the evidence from the calls we are now receiving, make that message even more urgent.
There is more information on dealing with HMRC arrears here.
If your company is falling behind with its tax obligations or HMRC has started enforcement action, call us or book a free consultation because an early, confidential conversation could help you understand your position and we can look at your options. Maybe those options will be, or will not be, what you want to hear or perhaps they will offer possibilities you never considered. Whatever the result, the faster you act, the better... otherwise all the decisions could be taken out of your hands.
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