If you have failed to pay your VAT, PAYE & NI, corporation tax, and/or you have missed payments according to your time to pay arrangement, HMRC can apply to the courts to have your company wound up to recover the monies owing. A winding up petition is one of the most serious actions HMRC can take against your company. If not properly managed, it will lead to the compulsory liquidation of your business, so we talk through the HMRC winding up process in detail here, and what you should do if your business has received an HMRC winding up petition, or you are concerned that it is going to.
A winding up petition is HMRC’s final resort. Prior to petitioning the court, it will send a statutory demand and numerous communications to your business requesting payment. You may also have received a visit from one of its enforcement officers. If it has no success, it will ask the courts to intervene.
The courts will notify you of the petition and its impending hearing (usually you are given between 4-8 weeks notice). If you do nothing, a winding-up order will be issued at this hearing to place your company into liquidation. Once the liquidation is in process, the liquidators will use the company’s assets firstly, to pay the costs of liquidation and secondly, to pay as many of the company’s creditors as possible.
In 2014, HMRC issued 3,074 winding-up petitions against UK companies, which rose to 3,484 in 2015, a 13% yearly increase. To put this in context, there were a total of 3,755 compulsory liquidations of businesses in England and Wales in 2014, which decreased to 2,889 in 2015.
When you receive the petition, you have 7 days to respond before the it’ll be advertised in the London Gazette. Once the petition is advertised, your bank and other creditors will see what is happening and they will react.
In order to deal with the petition with minimum cost impact therefore, it’s crucial that you act fast.
Realistically, you have six potential options when should your business face a winding up petition:
If you are thinking about formal insolvency procedures, our fee calculators will help you to get an idea of how much voluntary liquidation, a company voluntary arrangement or a prepack might cost you (our fee for a prepack is the same as our fee for liquidation, so use our liquidation calculator to find out how much prepack would cost).
If you require an adjournment of the petition to buy some breathing space, this is also something that we can arrange for you.
If you have any questions, or would like to talk anything through, contact one of our business rescue experts for more tailored advice.