Category: Resources

The UK’s film and TV industry is thriving, making it crucial for production businesses to understand VAT planning. Value Added Tax (VAT) affects their registration, tracking, filing, and payment processes. We will discuss key aspects of VAT planning for film and TV production businesses. This includes registration thresholds, filing options, VAT schemes, rates, returns, and the treatment of VAT on expenses. Understanding these topics helps businesses comply with HMRC regulations.

VAT Registration

Companies or self-employed individuals must register with HMRC for VAT when their business turnover exceeds or is expected to exceed the specified threshold in a financial year. You can find the current registration thresholds on the HMRC website. However, businesses can also make a voluntary election to register for VAT, even if their turnover is below the threshold or if they have dealings with other EU countries that require registration. The registration process can be completed online, and upon successful registration, HMRC provides a unique reference number required for filing VAT online.

VAT Filing and Payment

Once companies and individuals register for VAT, they account for VAT quarterly, although they can choose to file monthly VAT returns if preferred. This option benefits productions with minimal output VAT by allowing earlier VAT reclaims and improving cash flow. Businesses must file VAT returns on time and make payments before the deadline to avoid fines. HMRC provides several payment options, including direct debit, online payment, and bank payment.

VAT Schemes

In addition to standard VAT accounting, HMRC offers several VAT schemes that may be beneficial for film and TV production businesses. These schemes provide alternative methods of accounting for VAT and can help simplify the VAT process.

Cash Accounting Scheme

Businesses can account for VAT only on items that they have paid, thanks to the cash accounting scheme. This scheme is an alternative to the accruals basis, which accounts for VAT on invoices dated in the relevant quarter, whether they are paid or not. Businesses must consistently apply the chosen accounting basis each quarter.

Flat Rate Scheme

The flat rate scheme is available for businesses with turnover below a certain level (currently £150,000 as of March 2020). Under this scheme, businesses still charge VAT on sales invoices at the usual rate but pay HMRC a reduced fixed percentage of the VAT charged. However, businesses using the flat rate scheme cannot claim input VAT, as the reduced VAT paid covers potential input VAT.

Annual Scheme

The annual accounting scheme allows businesses to make equal quarterly or nine monthly payments of VAT on account throughout the year. These payments are based on the VAT paid in the previous year. At the end of the year, businesses only need to complete one VAT return. If they have overpaid, they can claim a refund from HMRC, and if they have underpaid, they make a balancing payment.

VAT Rates

The standard rate charges most UK VAT, but there are exceptions. Some items are zero-rated, meaning they are subject to VAT, but the applicable rate is zero percent. Additionally, certain items are exempt from VAT, such as insurance and interest charges. It is crucial for film and TV production businesses to understand the VAT rates applicable to their activities to ensure accurate VAT accounting.

VAT Returns

When filing a VAT return, HMRC focuses on the numbers in boxes 1 and 4, which represent output VAT and input VAT, respectively. Companies should keep separate nominal accounts for output VAT and input VAT and reconcile the nominal ledger VAT accounts with the net VAT payable on the VAT return. Companies must investigate and resolve any discrepancies before submitting the VAT return.

Making Tax Digital

HMRC’s rules for Making Tax Digital for VAT require VAT registered businesses with a turnover above the VAT registration limit to follow them from April 2019. This initiative aims to digitise VAT records and requires businesses to submit their VAT returns using compatible software. Before making VAT returns, businesses need to authorise their software for this purpose.

VAT for TV Production in the UK

VAT for TV production in the UK is a key part of financial planning for broadcasters, production houses, and post-production firms. Television projects often involve multiple suppliers, freelancers, and international transactions, which makes VAT treatment complex.

Key VAT Rules for TV Production

• Most UK TV production services are standard-rated at 20% VAT.

• Pre-production, filming, editing, and post-production costs are generally eligible for input VAT recovery, provided the company is VAT-registered.

• Exports of programming to non-UK broadcasters may qualify as zero-rated supplies, depending on where the customer is based and the place of supply rules.

• Co-productions involving overseas partners require careful VAT apportionment and contract-based review to determine liability.

Common Challenges

Production companies often face difficulties in recovering input VAT on mixed-use costs (for example, staff time shared between taxable and exempt supplies). Partial exemption methods and correct VAT coding are essential to maintain compliance.

Apex Accountants’ VAT Support for TV Producers

At Apex Accountants, we assist television producers with VAT registration, return preparation, and identifying reclaim opportunities on production costs. Our experts help apply the correct VAT rates, manage cross-border transactions, and prepare for HMRC queries or audits.

Strong VAT compliance in TV production not only reduces risks but also supports cash-flow stability, especially for long-running or commissioned series.

VAT for Movie Production in the UK

VAT for movie production in the UK plays a vital role in controlling budgets and maintaining compliance with HMRC’s strict digital record-keeping requirements. Film projects involve numerous suppliers, international spending, and rebates, all of which must be managed within the UK VAT framework.

Core VAT Considerations for Film Producers

• UK film production services are typically standard-rated at 20%, though some exports can qualify for zero-rating.

• Expenses incurred overseas may be eligible for recovery through the 13th Directive VAT refund scheme.

• Producers claiming Film Tax Relief (FTR) must keep VAT treatment consistent with cost allocations reported to HMRC.

• VAT grouping can simplify accounting for studios with multiple entities or subsidiaries.

Industry-Specific Complexities

Film production often includes grant income or investor funding, which can affect VAT recoverability. Additionally, imported equipment, crew accommodation, and location hire require correct reverse-charge and input VAT treatment.

How Apex Accountants Support Film Producers

Apex Accountants help UK and international film producers maintain full VAT compliance from pre-production through post-release stages. We advise on reclaiming input VAT, managing VAT on co-production deals, and preparing digital VAT submissions under Making Tax Digital (MTD).

With proper VAT planning, movie producers can prevent costly errors, safeguard rebates, and keep projects HMRC-ready at every stage.

VAT on Filming and Location Agreements

Traditionally, treating access to land or property for filming as a right over land did not involve charging VAT unless additional services provided were ancillary or apportionment was necessary. However, following the ruling in the Harewood Estate case, estates and country houses used for filming should now typically charge VAT for film income. Location agreements may vary in terms of services provided, such as electricity, toilets, parking, and accommodation. Even if owners have existing HMRC rulings stating that film income is exempt, these exemptions can be overturned. Therefore, it is advisable for owners to charge VAT where commercially achievable, as collecting VAT after the event can be challenging.

Treatment of VAT on Expenses

The treatment of VAT on expenses is an important consideration for film and TV production businesses. The production can reclaim VAT on disbursements, which are items where ownership transfers to the production. However, the production can only reclaim VAT on personal expenses if employees or non-VAT registered freelancers incur them, and the production keeps the original receipts. VAT registered freelancers must invoice for the net amount, with VAT charged on top, for the production to reclaim the VAT. Fuel receipts follow specific rules, such as fuel scale charge rules, when claiming VAT. These guidelines also apply to actors, extras, and other casual workers engaged in film, TV, or similar productions.

Conclusion

VAT planning is a crucial aspect of financial management for film and TV production businesses in the UK.

Please feel free to Book a free consultation with us today to plan your VAT affairs efficiently.

If you are a company director, business owner, or part of senior management, the UK’s new fraud laws may have already caught your attention. With the introduction of the failure to prevent fraud offence under the Economic Crime and Corporate Transparency Act 2023 (ECCTA), many businesses are now seeking clear failure to prevent fraud guidance to understand what it means for them.

From 1 September, a major change in the UK’s new fraud laws 2025 will affect how companies deal with fraud. This law means large organisations can be held criminally liable if someone connected to them commits fraud to benefit their business and the company does not have proper safeguards in place.

Business leaders are asking a key question: does this mean directors are personally liable if fraud occurs? The short answer is no—but companies cannot ignore the new rules. The focus is firmly on whether the organisation has a strong and regularly reviewed anti-fraud framework.

At Apex Accountants, we believe this shift is one of the most important legal changes for UK businesses recently. In this article, we explain what the law means, which organisations are affected, the types of fraud it covers, and the practical steps companies should now take to prepare.

Are directors personally liable if fraud occurs?

No. Directors are not personally liable for the new offence of failure to prevent fraud. The responsibility falls on the organisation itself. If an employee, agent, or subsidiary commits fraud to benefit the company, the business could face prosecution. The individuals directly involved in the fraud can still be charged under existing criminal law, but the new rules do not extend personal liability to directors.

What does “failure to prevent fraud offence” mean?

The Economic Crime and Corporate Transparency Act 2023 (ECCTA) introduces this offence, which comes into force on 1 September 2025. It is a strict-liability offence. That means:

• If someone linked to the company commits fraud to benefit the business or its clients, the company is liable.
  
• Prosecutors do not need to show that directors or senior managers ordered or knew about the fraud.
  
• The test is whether the company had reasonable anti-fraud procedures in place.
  

This strategy makes sure businesses concentrate on prevention rather than responding after the damage has already occurred.

Which organisations are affected?

The offence only applies to large organisations. A business is considered large if it meets at least two of the following:

• More than 250 employees
  
• Turnover above £36 million
  
• Assets over £18 million
  

These thresholds apply to groups as a whole, not just individual subsidiaries. Overseas companies are also caught if the fraud is carried out in the UK or harms UK victims.

What types of fraud are covered?

The law applies to a broad range of fraud offences. These include:

• Fraud by false representation, failing to disclose information, or abuse of position.
  
• False accounting.
  
• Fraudulent trading.
  
• Assisting or encouraging any of the above.
  

This wide coverage reflects the government’s aim to tackle corporate fraud in all its forms.

Do directors face any risk at all?

While directors are not personally liable under this specific offence, they still carry responsibility for oversight. Other laws, such as those against fraudulent trading and making false statements, can apply directly to individuals. This means governance and transparency remain essential. A robust compliance culture is the safest protection for both companies and their leaders.

What defences are available for companies?

A business can avoid conviction if it can prove:

• It had reasonable procedures in place to prevent fraud; however,
  
• It was not reasonable to expect such procedures given the nature of the organisation.
  

The cornerstone of this defence is a fraud risk assessment. Organisations are expected to:

• Identify where they are vulnerable to fraud.
  
• Document why certain procedures were adopted or rejected.
  
• Review the risk assessment regularly.
  

If assessments are not kept up to date, courts may decide that procedures were not reasonable.

What counts as reasonable procedures?

To defend against the failure-to-prevent fraud offence, companies must show they had reasonable procedures in place. Government guidance highlights six principles that every organisation should follow:

1. Leadership commitment
   Senior management must set the tone by promoting a culture of zero tolerance towards fraud. A clear message from the top builds confidence across the organisation.
   
2. Regular risk assessment
   Businesses should identify potential fraud risks, assess their likelihood and impact, and keep these assessments up to date as circumstances change.
   
3. Proportionate policies and controls
   Organisations need clear, practical anti-fraud policies supported by robust financial controls and internal reporting systems that match the size and nature of the business.
   
4. Training and communication
   Staff, contractors, and agents must be trained to spot warning signs of fraud and understand how to report concerns quickly and safely.
   
5. Monitoring and review
   Procedures must not remain static. Companies should monitor their effectiveness and adapt them as new risks emerge.
   
6. Third-party management
   Due diligence on suppliers, partners, and agents is vital. Contracts should include fraud-prevention clauses to make expectations clear.

By applying these principles, organisations put themselves in the strongest possible position to demonstrate that their prevention measures are both reasonable and effective.

What steps should businesses take now?

Apex Accountants recommends that organisations prepare before the offence takes effect.

• Check if you qualify under the large organization’s thresholds.
  
• Carry out a fraud risk assessment and keep it under regular review.
  
• Update anti-fraud policies across your group.
  
• Train employees, contractors, and agents on fraud awareness and reporting.
  
• Review contracts with partners to include anti-fraud clauses.
  
• Keep records showing how procedures were designed, applied, and monitored.

How Apex Accountants’ Failure To Prevent Fraud Guidance Can Help

Adapting to a failure to prevent fraud offences requires more than just policies on paper. It demands a clear, practical framework that proves a business takes fraud prevention seriously. At Apex Accountants, we provide hands-on support to help organisations prepare for this legal change.

Fraud Risk Assessments

We work with companies to identify their fraud risks, from internal controls to third-party exposure. To maintain their credibility in the eyes of regulators and courts, our team regularly reviews assessments and documents findings.

Policy and Procedure Design

We help draft proportionate anti-fraud policies, financial controls, and reporting systems tailored to your organization’s size and complexity.

Training and Awareness

Our training programs give employees and agents the knowledge they need to identify fraud risks and report concerns. This builds a culture of accountability across the business.

Monitoring and Review

We provide ongoing support to test and improve procedures, ensuring your fraud framework stays strong as your business grows and risks change.

Group and Third-Party Support

For groups with subsidiaries or overseas partners, we help implement consistent policies across all operations. We also review contracts to add the right fraud-prevention clauses.

Key takeaway on New Fraud Laws 2025

From 1 September 2025, large organisations will be liable for failing to prevent fraud committed by employees or associates. Directors are not personally liable, but the company itself could face prosecution and heavy fines.

At Apex Accountants, we work with businesses to design fraud-resilient systems, carry out risk assessments, and train teams. Contact Apex Accountants today to discuss how we can help your organisation prepare. Acting now will protect your organisation and show that you are ready for the new law.

HMRC’s latest annual report shows that losses from small-business phoenixing reached £836 million in 2022–23, a 45% increase on previous estimates. The practice now accounts for about a fifth of HMRC’s overall tax losses. The Chancellor has announced plans to tackle the problem through joint action by HMRC, Companies House and the Insolvency Service.

In this article, we will explain what phoenixing is, why it is a particular problem among small businesses, and outline the penalties that directors face when using it illegally. We will also explore how HMRC investigates phoenixing, the warning signs it looks for, the role of Companies House, and the resources available to help businesses avoid accidental breaches. Finally, we will set out how Apex Accountants can provide expert support to help directors stay compliant and protect their business from risk.

What is phoenixing?

Phoenixing (sometimes called “phoenix trading”) occurs when a company enters insolvent liquidation and the directors form a new company using the same or similar name in order to continue trading. The new entity often carries on the same business but without the liabilities of the former company, leaving creditors (including HMRC) unpaid. HMRC’s internal manual on the Targeted Anti‑Avoidance Rule (TAAR) notes that phoenixism allows individuals to convert what would otherwise be dividends into capital receipts; the new company “rises from the ashes” of the old one. Deliberately using phoenixing to escape tax liabilities is illegal.

What is small‑business phoenixing?

Small‑business phoenixing is the abuse of this tactic by directors of small and micro companies. The Insolvency Service reports that phoenixing often involves close companies (five or fewer shareholders) where the owners have a 5% or greater shareholding. HMRC estimates that about 81% of tax evasion losses come from small businesses, with a significant portion linked to phoenixism. Retail and construction sectors are particularly vulnerable to this abuse.

Government response to phoenixing

Phoenixing takes place when a company is closed down and a new business is created in its place.

• In some cases, it is a legal restart after genuine financial difficulty.
• In other cases, it is used to avoid paying taxes, suppliers, or other debts.
  

When directors deliberately shed liabilities and start again debt-free, HMRC treats it as tax evasion.

Scale of the problem

The most recent data shows that phoenixing made up nearly 20% of HMRC’s total tax losses. The pandemic delayed insolvency declarations, which contributed to the rise. Reports also suggest the practice is common among small firms, particularly in retail and construction.

The Chancellor has pledged stronger action. A joint strategy now links HMRC, Companies House, and the Insolvency Service. Planned measures include:

• Higher upfront payment requirements.
• Wider use of enforcement powers.
• Greater personal liability for directors.

These steps aim to stop deliberate abuse while still allowing genuine business recovery.

Penalties for small‑business phoenixing

Penalties for illegal phoenixing vary depending on the circumstances and laws breached:

• Income tax charges and penalties – under the TAAR, distributions from a winding up that meet the four conditions are taxed at dividend rates. This can result in a higher tax bill than the entrepreneur expected.
  
• Joint and several liability – when HMRC issues a joint and several liability notice, directors and other individuals can be held personally liable for the company’s tax debts. Individuals who ignore such notices risk civil recovery and insolvency.
  
• Civil penalties and enforcement sanctions – HMRC can demand security deposits, impose penalties, and use enforcement sanctions. The transformation roadmap aims to double the amount of tax protected to £250 million by 2026‑27 through increased sanctions.
  
• Director disqualification and criminal prosecution —Directors who breach insolvency legislation by continuing to trade under a prohibited name can be disqualified for up to 15 years and may be prosecuted. The Insolvency Service reports a case where a director running multiple phoenix companies received an eight‑month suspended prison sentence and a five‑year disqualification.
  
• Further criminal offenses— HMRC can bring charges for fraudulent trading, tax evasion, or other offences under the Fraud Act or Insolvency Act. Serious cases may lead to imprisonment, fines and the confiscation of assets.

Where to find more information about HMRC’s efforts

Useful resources for understanding HMRC’s response include:

• HMRC’s Transformation Roadmap – published in July 2025. The roadmap explains that HMRC is working with the Insolvency Service and Companies House to crack down on contrived insolvency and abusive phoenixism by increasing the use of upfront payment demands (securities), making more directors personally liable for company debts and boosting enforcement sanctions gov.uk.
  
• Company winding‑up TAAR manual (CTM36305) – the HMRC internal manual sets out the conditions under which HMRC will treat liquidation distributions as income rather than capital. It includes examples of phoenixism and details the four conditions.
  
• Insolvency Service’s Director Information Hub – launched in 2023. The hub provides bite‑sized guidance to help directors understand their duties, recognise signs of distress and avoid insolvency.
  
• HMRC’s tax fraud reporting service – GOV.UK includes an online form and fraud hotline for reporting suspected tax avoidance or evasion.
  
• Companies House business plan and blog – these explain how new powers under the Economic Crime and Corporate Transparency Act allow Companies House to query and remove false information and implement identity verification to help disrupt phoenixism.
  

How does HMRC investigate phoenixing?

HMRC investigates phoenixing through a combination of civil powers, targeted anti‑avoidance rules and criminal enforcement. Key tools include:

Targeted Anti‑Avoidance Rule (TAAR)

HMRC will treat a liquidation distribution as an income distribution (subject to dividend tax) if four conditions are met: the individual held at least a 5% interest; the company was a close company within the previous two years; the individual resumes the same or similar trade within two years; and obtaining a tax advantage was one of the main purposes. HMRC interprets the “similar trade” condition broadly – carrying on the same activity as a sole trader, through a partnership or through another company can trigger the rule. The TAAR denies the lower capital gains tax rate, thereby removing the tax benefit of phoenixing.

Joint and several liability notices

Under Finance Act 2020, HMRC can issue a notice making directors or participants personally liable for the tax debts of companies where there is repeated insolvency followed by phoenixing. Once issued, the individual becomes jointly and severally liable for the outstanding tax.

Enforcement with the Insolvency Service

HMRC works closely with the Insolvency Service to investigate breaches of company and insolvency law. The Insolvency Service’s annual report notes that phoenixing is a priority and gives examples where directors have been prosecuted and disqualified for breaching section 216 of the Insolvency Act 1986; one director received an eight‑month suspended prison sentence and a five‑year director disqualification for operating multiple phoenix companies.

Collaboration with Companies House

New powers allow Companies House to share data with HMRC and the Insolvency Service, remove incorrect information and strike companies off the register more quickly. HMRC uses this data to identify patterns of repeated insolvency, suspicious director activity and false addresses.

Upfront payment demands

HMRC can require businesses considered high risk (for example, those with a history of default) to provide a security deposit before trading. The transformation roadmap indicates that HMRC will increase use of these securities to deter phoenixism.

Resources to help businesses avoid accidental phoenixing

Directors who want to avoid inadvertently falling foul of the anti‑phoenix rules should:

• Use the Director Information Hub for guidance on their duties, day‑to‑day business management and recognising distress. The hub includes topics such as spotting the signs of company distress, turning the company around and consequences of insolvency.
  
• Watch for financial distress signals – the Insolvency Service lists warning signs such as persistent cash‑flow problems, late payment of bills, delaying PAYE or National Insurance contributions, high interest on loans and low profits despite strong sales. Early action can help companies restructure rather than resort to illegal phoenixing.
  
• Obtain professional tax advice before winding up a company. The TAAR can apply if a person holds 5% or more of a close company and restarts a similar trade within two years.
  
• Ensure compliance with Companies House filing requirements. New identity verification rules and stricter removal powers mean false or misleading filings are more likely to be detected.
  

How to report suspected phoenixing

Anyone can report suspected phoenixing or tax evasion to HMRC by:

• Completing HMRC’s online fraud reporting form on GOV.UK.
  
• Calling the HMRC Fraud Hotline on 0800 788 887 (or +44 203 080 0871 from outside the UK). The hotline is open Monday to Friday, 9am to 5pm. Reports can be made anonymously, and HMRC keeps details confidential.
  

For fraudulent use of the dissolution process, members of the public can also complain to Companies House using its “Report it to us” service. This supports HMRC and the Insolvency Service in identifying misuse of company dissolutions.

Warning signs HMRC looks for

HMRC and the Insolvency Service look for patterns that indicate abusive phoenixing. Common warning signs include:

• Repeated insolvency followed by new companies carrying on identical trades under the same directors.
  
• Directors with a history of liquidating companies and immediately forming new entities.
  
• Transfers of assets to a new company for little or no value, leaving creditors unpaid (often identified through insolvency investigations).
  
• Requests for payments to a different company while employees, management and operations remain unchanged – this can indicate a shift to a new, debt‑free entity.
  
• Low tenders or quotes that are below market rates and cannot be sustained.
  
• Late or missing PAYE/NIC payments; HMRC lists delaying tax payments as a sign of a company in distress.
  
• Changing company names and directors but keeping the same management and staff.
  
• Not providing payslips or superannuation/pension contributions to employees – while this guidance originates from the Australian Taxation Office, the same warning signs often flag potential illegal phoenixing.
  

Business owners should seek advice if they see these signs within their own organisation or when dealing with suppliers or contractors.

Role of Companies House

Companies House is no longer simply a passive register. The Economic Crime and Corporate Transparency Act 2023 has given it new powers to play an active role in preventing phoenixism and economic crime. According to Companies House’s 2024‑25 business plan:

• It now acts as a gatekeeper of company information, with authority to query and remove false, misleading or incorrect data.
  
• It can remove suspicious registered office addresses and officer details; by January 2025 it had removed over 60,000 suspicious addresses and 47,200 officer addresses.
  
• From March 2025, Companies House gained powers to strike off companies quickly if registered on a false basis and to require all directors and people with significant control to verify their identity. Identity verification makes it harder for directors to hide behind false names when repeatedly forming phoenix companies.
  
• It shares intelligence with HMRC and the Insolvency Service as part of a joint plan to tackle phoenixism.
  

By improving the accuracy of company data and working with other agencies, Companies House helps identify repeated insolvency patterns, suspicious director behaviour and fraudulent filings. This data supports HMRC’s investigations and allows early intervention.

How Apex Accountants Can Help

We support tighter rules to reduce the abuse of insolvency law. However, legitimate business owners who need to restructure should not be penalised. The right advice can help companies exit financial distress while staying fully compliant.

At Apex Accountants, we provide:

• Compliance guidance: We help directors understand HMRC’s TAAR conditions and ensure that any winding‑up is compliant, preventing inadvertent tax penalties.
  
• Risk assessment: We analyse clients’ trading patterns and director histories to flag potential phoenixing risks before HMRC does.
  
• Restructuring support: If a company is in distress, we advise on rescue options and legitimate liquidations, so owners can restart without breaching anti‑phoenix rules.
  
• HMRC liaison: Our experts manage communications with HMRC, including responses to joint liability notices and security deposit requests.
  
• Reporting and training: We assist with fraud reporting and deliver training to staff on recognising red flags and complying with new Companies House identity‑verification requirements.

Conclusion

Small-business phoenixing has become a growing concern, with HMRC losses now exceeding £800 million. To address this, HMRC is stepping up its approach through targeted anti-avoidance rules, joint and several liability notices, closer collaboration with Companies House and the Insolvency Service, and tougher penalties for illegal phoenixing.

For directors, it is vital to understand legal duties, recognise early signs of financial distress, and seek timely professional advice before winding up a company. Acting responsibly reduces the risk of breaching anti-phoenixing rules and protects both businesses and the wider tax system.

At Apex Accountants, we support directors in managing company restructuring, compliance, and tax planning in line with HMRC requirements. Our team offers clear, practical guidance to help businesses make the right decisions, avoid penalties, and continue trading on a secure foundation. By working with us, business owners can stay compliant, safeguard their reputation, and contribute to a fairer tax environment.

Contact Apex Accountants today to discuss your company’s position and get tailored advice on compliance, restructuring, and future growth.

HM Revenue & Customs (HMRC) has confirmed it lost £836 million in the 2022–23 tax year due to “phoenixing,” a practice where companies deliberately shut down and restart under a new name to escape debts. The scale of the loss, significantly higher than previous estimates, highlights how widespread the problem has become and why the government is now taking stronger action.

What is phoenixing?

Phoenixing occurs when directors shut down a company with outstanding debts and immediately start a new entity. The new business often uses the same staff, assets, and operations, but leaves the old debts behind.

Sometimes directors take this step after genuine insolvency. However, when they deliberately do it to escape tax or other liabilities, they commit an illegal form of tax evasion.

Rising tax losses

HMRC reported losses of £836m to phoenixing in the 2022–23 tax year. This is 45% higher than the £570m estimated previously.

The increase has been linked to delays in insolvency filings during the pandemic. Many struggling firms held off declaring insolvency, leaving HMRC unable to act quickly.

Phoenixing accounted for around one-fifth of HMRC’s overall uncollected tax in that year. This shows how serious the issue has become for the UK tax system.

Sectors most affected

The practice is most common in sectors with frequent insolvencies and short-term trading pressures. Retail has been highlighted as a key area where phoenixing is used. Construction and service-based businesses also face risks.

Concerns from auditors

The National Audit Office (NAO) has raised concerns about HMRC’s approach to tackling tax evasion. A 2024 report found that total losses from evasion reached £5.5bn in 2022–23. Small businesses were responsible for 81% of that figure.

Since 2019–20, losses linked to small business evasion have surged by 66%. Experts warn that phoenixing is one of the most damaging methods.

New developments

In her Spring Statement, Chancellor Rachel Reeves pledged to tackle phoenixing and announced a joint campaign between HMRC, Companies House and the Insolvency Service.

Actions now being rolled out include:

• Increased demands for payments upfront.
• Greater use of enforcement sanctions.
• Making more directors personally liable for unpaid taxes.

Specialist compliance teams and improved data analysis are also being introduced to identify risky dissolutions earlier and reduce abuse.

Apex Accountants’ View on Small Business Phoenixing

At Apex Accountants, we see phoenixing as a growing threat not just to the tax system, but also to compliant businesses that play by the rules. The scale of losses highlights why enforcement has become a government priority.

We believe clearer guidance is needed for small businesses to understand where legitimate restructuring ends and phoenixing begins. Without this, some directors may fall foul of the rules unintentionally, while deliberate abusers continue to exploit the system.

How can our services help?

Apex Accountants supports businesses by:

• Providing tax planning and compliance advice to reduce risks.
  
• Offering director liability guidance to help protect individuals.
  
• Delivering business restructuring support that keeps everything above board.
  
• Ensuring strong record-keeping and audits to demonstrate transparency.
  
• Using early warning systems to spot cash flow issues before they escalate.
  

For any business facing financial pressure, professional guidance can prevent costly mistakes. We help clients restructure legally, protect their reputation, and avoid practices that could be classed as phoenixing.

Final Thoughts on Small Business Phoenixing

Phoenixing is costing HMRC and the UK economy billions in lost tax. With £836m lost in one year alone, the government is determined to tighten controls. Businesses should prepare for tougher rules and stronger enforcement in the years ahead.

At Apex Accountants, we provide clear advice and practical support to keep businesses compliant and secure. Contact us today to arrange a consultation and see how we can help your business move forward with confidence.

From 6 April 2027, a major change will affect how HMRC treats unused pension funds for inheritance tax (IHT) in the UK. For the first time, most untouched pension pots and death benefits will count as part of the deceased’s estate for IHT purposes. As a result, many families may face higher tax bills and will need to plan their estates more carefully.

The government introduced this change to prevent people from using pensions mainly to transfer wealth. They want pensions to fund retirement, not to reduce taxes.

In this article, we explain what’s changing, who it will affect, how to prepare, and why speaking to a professional advisor is more important than ever.

What’s Changing from April 2027?

Currently, unused pension funds are often passed on tax-free, especially when the pension holder dies before age 75. But from 6 April 2027, this will no longer be the case.

Key changes include:

• Unused pension pots will be included in the estate for IHT purposes.
  
• The current IHT rates may now apply at 40% on amounts above the nil-rate band.
  
• Pension scheme administrators will report the value of the pension, but the personal representative (executor) must pay the IHT.
  
• Most exemptions, like those for spouses, civil partners and charities, still apply.
  
• Death-in-service benefits remain outside of the IHT scope.
  

The government is introducing these changes under a new section of the Inheritance Tax Act 1984 (section 150A). It has already published the draft legislation, and the consultation remains open through 15 September 2025.

Who Will Be Affected?

The new rules affect a wide group of people:

• Individuals with large pension pots
  Those with significant pension wealth may find their estate exceeds the IHT threshold once pension savings are added in.
  
• Beneficiaries of unused pensions
  Family members or other beneficiaries who inherit pensions may now have to share responsibility for paying IHT.
  
• Personal representatives
  Executors and administrators of estates will need to report the value of unused pensions and ensure any IHT is paid within six months of death.
  
• Pension scheme administrators
  They must provide information to personal representatives to support IHT reporting, though they won’t be responsible for paying the tax.
  

Current IHT Rates and Thresholds: A Quick Recap

The current IHT rate is 40%, charged on the value of an estate that exceeds the nil-rate band of £325,000. This threshold is frozen until at least April 2030.

However, married couples and civil partners can pool their allowances and use the residence nil-rate band, potentially raising their total IHT-free threshold to around £1 million.

With inheritance tax on unused pension funds taking effect, more families may face unexpected IHT bills—especially those who assumed pensions were tax-free assets.

Why the Change?

The Treasury states that this change aligns pensions with other types of wealth. Ministers believe people increasingly use pension pots to pass on wealth instead of funding retirement.

The government also estimates the change will raise £640 million in its first year (2028–29), growing to £1.34 billion annually, affecting around 40,000 estates with an average tax increase of £34,000.

Exemptions That Still Apply

While this reform is significant, some important exemptions remain:

• Spouses and civil partners continue to benefit from full IHT relief.
  
• Charities are exempt when they receive death benefits.
  
• Death-in-service lump sums remain outside the IHT net if the person was still employed at the time of death.
  
• Certain defined benefit (DB) schemes and dependants’ pensionsmay still be eligible for relief under certain conditions.
  

What About Income Tax?

The inheritance of pension benefits may also trigger income tax, depending on the age of the deceased:

• If the pension holder dies before age 75, the inherited pension is usually income tax-free.
  
• If they die on or after turning 75, any lump sums or drawdown income are taxed at the recipient’s marginal rate.
  

When HMRC directs a pension scheme administrator (PSA) to pay IHT on behalf of a beneficiary, the administrator makes the payment directly. This is treated as an authorised payment and not taxed as income.

If the PSA doesn’t make the payment and the beneficiary receives the full pension value, income tax may be due, and the beneficiary must contact HMRC to request a refund of overpaid tax. HMRC plans to release detailed guidance on this process in the future.

Administrative Challenges

This change will bring more complexity to an already difficult time for bereaved families. The current IHT system is not yet digitised, and HMRC has admitted that a new system must be developed to handle these changes. This will have a “significant operational resourcing impact” on the department.

Critics of the policy, including industry experts, have expressed concern. They argue that the added complexity and strict six-month deadline could overwhelm executors, especially in cases with large or complex estates.

Estate Planning Becomes More Important

With these changes, those with significant pensions should start reviewing their estate planning strategy now.

Here are some steps to consider:

• Review your pension nominations: Make sure they are up to date and reflect your current wishes.
  
• Speak to an estate planning specialist: A financial advisor or accountant can help you understand your potential IHT liability and suggest ways to reduce it.
  
• Use other tax allowances: For example, make use of the residence nil-rate band and consider gifting strategies.
  
• Think carefully about pension drawdowns: Withdrawing from your pension earlier may reduce the value of your estate and the future tax burden on your beneficiaries.

Need Support with Inheritance Tax on Unused Pension Funds?

The changes coming in April 2027 mark one of the most significant updates to the UK’s pension and inheritance tax rules in recent years. While most families will still not be affected by IHT, thousands more estates will now fall within its scope due to the inclusion of unused pension pots.

This means careful planning is essential—not just to manage tax liabilities but to reduce the administrative burden on your loved ones. Delays in dealing with IHT could cause financial pressure on families at an already challenging time.

Apex Accountants has been helping UK families with pension tax planning and estate management since 2006. Our experienced advisors understand the impact of IHT changes and offer tailored guidance to suit your situation.

We work closely with personal representatives, beneficiaries, and pension providers to ease the reporting burden and keep everything on track. Whether you’re preparing your estate or dealing with probate, we’re here to help.

In July 2025, HMRC came under fresh criticism after multiple reports revealed basic errors being made by its helpline staff. Despite significant recruitment efforts and major government investment, many taxpayers and agents feel that HMRC online services are still failing to deliver a high-quality service. At Apex Accountants, we’ve seen firsthand how HMRC helpline errors can cause stress, delays, and unnecessary costs for clients.

Here, we break down the latest issues at HMRC, what they mean for taxpayers, and how our team at Apex Accountants helps businesses and individuals stay compliant and well-supported in the face of growing uncertainty.

Why Is HMRC Being Criticised?

Recent reports highlight a concerning trend—helpline staff at HMRC have been accused of making basic errors when assisting callers. This includes giving incorrect advice, failing to understand technical tax queries, and causing confusion during time-sensitive situations.

A survey of taxpayers and agents found that many helpline staff lack the training and expertise to handle even standard queries. Webchat functions are often unreliable, phone calls have long wait times, and too many queries go unresolved. This leaves taxpayers frustrated and misinformed.

What Is HMRC Doing to Improve?

HMRC’s newly appointed CEO, John-Paul Marks, has shared ambitious plans to close the UK tax gap, which currently stands at £46.8 billion. HMRC CEO goal is to reduce non-compliance and make HMRC a modern, productive, and efficient organisation. Some of the steps include:

• Hiring 5,500 compliance staff by 2029-30, with 500 already in place
  
• £630 million in additional government funding
  
• Expanding the entry-level trainee programme, although it takes four years for new staff to become fully productive
  
• Boosting criminal investigations through the Counter Fraud Academy
  
• Introducing a People Strategy to improve skills, learning, and training
  

Despite these plans, many experts have raised concerns. The training timeline is long, and entry-level staff may not be able to manage complex tax issues in the short term. Until fully trained, the risk of HMRC helpline errors remains high.

Employee Engagement at HMRC Is Low

Even with the People Strategy in place, HMRC is struggling to keep its workforce engaged. The employee engagement index has not gone above 59% in the last five years and currently sits at 56%.

There have also been high staff turnover rates. Between 2024 and 2025, HMRC hired 6,408 new employees, but 5,385 left during the same period. These figures show that HMRC faces challenges in both training and retaining staff.

What Do HMRC Helpline Errors Mean for Taxpayers?

The problems at HMRC have a direct impact on taxpayers, especially those who rely on timely and accurate advice. HMRC helpline mistakes, including getting wrong answers, confusion from incorrect guidance, and unresolved issues, can result in:

• Missed tax deadlines
  
• Incorrect tax filings
  
• Penalties from HMRC
  
• Loss of time and peace of mind
  

This is where working with a professional and responsive accountant makes a real difference.

How Apex Accountants Supports Clients Through HMRC Challenges

At Apex Accountants, we understand that dealing with HMRC can be overwhelming. That’s why we step in to act as your authorised agent, taking the stress off your shoulders. Here’s how we help:

1. Accurate and Timely Tax Filings

We manage all your tax deadlines—whether it’s VAT returns, corporation tax, PAYE, or self-assessments. Our team double-checks everything before submission to avoid errors and delays.

2. Dealing With HMRC on Your Behalf

You won’t have to sit on hold or chase the right person. We liaise with HMRC for you, whether it’s to resolve queries, correct issues, or track submissions.

3. Professional Representation During Disputes

If HMRC makes an error or opens an investigation, we represent your case. Our tax specialists prepare and present your records properly, reducing the risk of fines or extra tax.

4. Clear, Practical Advice

With helpline staff often giving vague or incorrect answers, we provide straightforward tax advice based on your specific situation—whether you’re a business owner, contractor, landlord, or freelancer.

5. Support with HMRC Letters and Notices

We explain what any HMRC letter means, advise on the next steps, and respond on your behalf. This avoids miscommunication and ensures things are dealt with promptly.

HMRC’s Efforts on Tax Adviser Oversight

In its annual report, HMRC also highlighted its efforts to raise standards in the tax advice market. In 2024-25, it blocked access 1,285 times to advisers who didn’t meet expectations. It also raised £1.75 million through 183 investigations into adviser tax affairs.

While this focus on quality is welcome, it places extra pressure on businesses and individuals to choose tax advisers who are fully compliant, experienced, and reliable. Engaging with a qualified and registered firm such as Apex Accountants ensures compliance with HMRC regulations at all times.

Whistleblower Compensation and Fraud Prevention

HMRC also reported a total of 164,670 tax fraud reports from the public this year. This led to the opening of 11,000 investigations, 446 of which resulted in criminal cases. The government paid £852,438 to whistleblowers whose reports helped recover tax.

These figures show that HMRC is increasing efforts to detect and penalise fraud. However, it also means that innocent taxpayers need to be extra careful about recordkeeping and tax reporting. Any discrepancy, even accidental, could lead to questioning or investigations.

At Apex Accountants, we support clients in understanding UK tax gaps, keeping clean, accurate records to avoid any red flags, and responding confidently if questions arise.

Plan To Handle HMRC Helpline Mistakes

HMRC CEO John-Paul Marks insists that HMRC has the vision, investment, and ambition needed to move forward. He says the department is committed to acting with fairness, integrity, and empathy while meeting government goals and improving taxpayer services.

However, action must now match these promises. Until then, many taxpayers remain frustrated by slow, inaccurate HMRC online services.

Don’t Let HMRC Helpline Errors Cost You

Let Apex Accountants handle your tax and compliance matters so you can focus on running your business with confidence. Contact us today for a free consultation and get expert support you can count on.