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.
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.
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.
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.
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.
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:
Specialist compliance teams and improved data analysis are also being introduced to identify risky dissolutions earlier and reduce abuse.
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.
Apex Accountants supports businesses by:
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.
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.
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