HMRC Winding Up Petition: A Guide for Worried Directors

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HMRC Winding Up Petition: A Guide for Worried Directors
HMRC Winding Up Petition: A Guide for Worried Directors
Written by Jeremy Boyle Last Updated: 7 May, 2026
All Insolvency

You’ve either just received a winding up petition from HMRC, or you’re worried one is on the way. Either scenario can feel overwhelming. But there are clear steps you can take.

At Summit Law, we regularly advise directors in exactly this position — often at short notice — so the focus here is on what matters most.

In this guide, I’ll explain what an HMRC winding up petition means, why they happen, and what you can realistically do next. I’ve set it out in plain English, based on how these cases actually unfold.

Jump to:

What is a HMRC winding up petition?

A HMRC winding up petition is a formal court application asking to have a company compulsorily liquidated because it cannot pay its tax liabilities. Unlike trade creditors, HMRC does not need to issue a statutory demand before petitioning and will act without warning where engagement has broken down.

HMRC typically petitions for unpaid:

  • VAT: including historic arrears and amounts disputed but not formally challenged
  • PAYE and National Insurance: often triggered where an employer has failed to make payroll deductions or remit them on time
  • Corporation Tax: particularly where payment plans have been missed or ignored

In 2025, HMRC winding up petitions reached a year high with 423 petitions filed in October, the highest monthly level since October 2024.

Why the first 24 hours matter most

The clock starts the moment the HMRC winding up petition is served. 
  • You have a short window before the advertisement
  • After the advertisement, bank accounts are likely to be frozen
  • Options become more limited and more complex.
Most directors who successfully deal with HMRC petitions take action within the first few days. Delaying — even by a week — can change the outcome entirely.

What debts lead to a HMRC winding up petition?

The most common triggers are unpaid tax liabilities, including: VAT arrears, PAYE and employer NICs, and Corporation tax. 

The legal threshold for a winding up petition is £750, but HMRC rarely acts at that level. In practice, HMRC usually uses petitions for much larger debts, often after repeated or persistent non-payment.

In April 2020, the UK government restored HMRC as a “secondary preferential creditor” for certain taxes, including VAT and PAYE. These are taxes collected by businesses on behalf of others, such as employee deductions.

This status means:

  • HMRC ranks ahead of unsecured creditors for those specific debts
  • Recovery prospects for other unsecured creditors may be reduced
  • HMRC has a greater priority in insolvency, which can influence its approach to debt recovery.

Other liabilities, such as corporation tax and employer National Insurance Contributions, remain unsecured.

This change has increased HMRC’s priority in insolvency and is widely seen as a factor in its more assertive approach to enforcement.

What does HMRC do before it issues a winding-up petition?

Winding up petitions rarely arrive without warning. HMRC is more likely to take action where a company has failed to engage meaningfully with attempts to resolve the debt.

In many cases, the process follows a general pattern:

  1. A business misses a payment deadline
  2. HMRC issues reminders and overdue notices
  3. HMRC makes a formal demand for payment
  4. A Time to Pay arrangement may be proposed (HMRC may demand repayment of the whole debt if this is refused, or a payment is later missed)
  5. A HMRC investigation may request detailed financial information (such as cashflow forecasts, bank statements and management accounts) to assess affordability
  6. The case is escalated to HMRC’s enforcement division or external solicitors
  7. A statutory demand may be issued (though this is not required before a petition)
  8. HMRC issues written warnings referring to “further action” (often a 7-Day or 21-Day warning letter)
  9. A winding-up petition is filed at court and served on the company.

It’s important to understand that HMRC does not always follow every step. Some companies receive a winding up petition without ever receiving a statutory demand. That can come as a shock, but it is legally permitted.

What happens after HMRC serves the petition (from petition to court hearing)?

After HMRC serves the winding-up petition, the process typically unfolds as follows:

Day 0: The petition is served at the company’s registered office.

Days 1–7:The critical window. The petition has not yet been advertised, and options remain open.

After 7 business days: HMRC can advertise the petition in the London Gazette. Once advertised:

  • Bank accounts are usually frozen
  • Suppliers and customers may become aware
  • Credit agencies flag the company.

8–10 weeks after issue (approx.): The court hearing takes place (timing can vary). At the hearing, the court may: grant a winding-up order, adjourn the case, or dismiss the petition.

It’s also important to note that both HMRC and the company (or its representatives) can present their position before the court makes a decision.

The critical window

The 7-day window before advertisement is often the most important period in the entire process, and is where you have the most options. 

After the petition is advertised, banks often freeze the company’s accounts. This is because payments made after the petition is presented can later be declared void under section 127 of the Insolvency Act 1986.

Likewise, confidence can fall quickly once a petition is advertised. Suppliers may tighten terms, customers may hesitate, and access to refinancing or new funding can become significantly more limited.

Can HMRC get the figures wrong, and can you challenge them?

Yes. HMRC can and does issue winding-up petitions based on incorrect figures.

Errors can arise in:

  • VAT assessments
  • PAYE calculations
  • Corporation tax demands.

In some cases, HMRC bases its figures on estimates rather than final agreed liabilities. These assessments can be higher than the true amount owed.

If the debt is genuinely disputed — even in part — this may be grounds to challenge the petition. If only part of the debt is disputed, it may be possible to pay the undisputed amount and challenge the balance.

As such, it is critical to:

  • Check the figures immediately
  • Identify any inaccuracies
  • Gather supporting evidence quickly.

Courts will not allow the winding-up process to be used where there is a substantial dispute over the debt. However, any challenge will need to be supported by clear evidence, such as financial records, correspondence with HMRC, and supporting calculations.

There have been cases in which petitions were struck out for procedural or evidential reasons, reinforcing the importance of early scrutiny.

The key point is simple: do not assume HMRC is correct without checking.

Case example: DG Resources Ltd v HMRC [2025]

In DG Resources Ltd v HMRC [2025], the High Court confirmed that winding-up petitions must be served in strict accordance with the Insolvency Rules 2016. Service errors can place a petition at risk. This reinforces the importance of checking not only the figures but also how the petition has been issued and served.

What are your options when you receive an HMRC winding-up petition?

Directors generally have several potential routes available to them on receipt of a winding-up petition. The right option depends on whether the debt is genuinely owed and whether the business is still viable. 

Option 1: Pay the debt in full

The fastest way to stop the winding-up petition and liquidation process is to repay the debt owed. But paying HMRC does not automatically end the case. 

HMRC’s legal costs may also need to be dealt with, and the court must still formally dismiss the petition. If possible, repaying the debt is better done before the petition is advertised.

Option 2: Negotiate a Time to Pay (TTP) arrangement

An HMRC TTP arrangement is a negotiated payment plan that allows businesses to pay their tax liabilities in agreed installments. 

HMRC may agree to staged payments where:

  • Returns are up to date
  • The figures are clear
  • The proposal is realistic and affordable.

Option 3: Dispute the debt

If the liability is incorrect or genuinely contested, the petition can be challenged. This must be done quickly and with evidence. 

Where a genuine dispute exists, an injunction can help: 

  • Restrain the advertisement of the petition
  • Challenge the petition before it proceeds further.

Option 4: Apply for an adjournment

The court can delay the hearing to allow time to resolve the issue, particularly where a resolution is close. However, a speculative request for delay with no clear rescue plan is unlikely to be approved.
 

Option 5: Apply for a validation order

If your bank account is frozen, a validation order allows essential payments to continue with court approval. The court will usually expect evidence that the proposed payments are necessary and in the interests of creditors as a whole.

Option 6: Seek an injunction to prevent advertisement

If you act quickly, the court can stop the petition from being advertised. This can protect your business from immediate banking and reputational consequences.

Option 7: Company administration or CVA

Where the underlying financial position is serious, formal legal measures may be the right solution. For example: 

  • CVA. A company voluntary arrangement allows a company to come to an arrangement with its creditors. At least 75% of the creditors voting (by the value of the debt owed) must approve the CVA.
  • Administration. Can be the right option if a company cannot pay the petition debt, but still has a viable core business or asset base worth protecting. Once a company is in administration, no winding-up order may be made against it, except in very limited circumstances.

What happens if HMRC gets a winding up order?

A winding up order is the court’s decision to “wind up” a company and place it into compulsory liquidation. This differs from a winding-up petition, which is a creditor’s (often HMRC’s) application to the court asking for the company to be wound up.

Once a winding-up order is made:

  • The Official Receiver takes control
  • Directors lose authority over the business
  • Bank accounts remain frozen
  • A liquidator may be appointed
  • The company’s affairs are investigated.

This includes scrutiny of:

Directors may also face:

  • Disqualification proceedings
  • Personal liability claims in certain circumstances.

A winding-up order does not have to be the end — but it significantly narrows your options. 

What is the personal risk to directors?

Under section 127 of the Insolvency Act 1986, payments made after a petition may be void. But the risks are not limited to the company. If a director authorises payments that are later deemed void, the liquidator can pursue them personally. This can expose directors to personal liability. 

Risks for directors include:

Courts do distinguish between directors acting in good faith and those acting recklessly. But once a petition is in play, the margin for error is small. Acting quickly — and taking proper legal advice — is the most effective way to protect yourself.

How do you stop an HMRC winding up petition?

If you wish to stop a HMRC winding up petition, focus on the three routes below:

  1. Resolve the debt. Pay in full or agree a Time to Pay arrangement.
  2. Challenge the petition. Dispute the figures or the basis of the claim.
  3. Restructure the company. Consider administration or a CVA if the business is under wider pressure.

The right approach depends on your financial position, the size and accuracy of the debt, and how much time you have. We can help you assess all three.

HMRC winding-up petition - FAQs

Yes, but with serious restrictions. Trading continues until a winding-up order is made, but Section 127 of the Insolvency Act 1986 means payments made after the petition is presented may later be ruled void. Directors who trade recklessly after this point risk personal liability.

You have around seven business days from service before the petition is advertised in The Gazette. That advertisement window is your most important deadline. Once advertised, bank accounts may freeze and rescue options narrow fast. Instruct a solicitor within 24 hours of service.

HMRC can negotiate after a petition is filed, but their willingness reduces sharply once proceedings have started. A Time to Pay arrangement remains possible, but HMRC will expect a credible and affordable proposal. Early engagement before the petition is always a stronger position.

Costs vary depending on the complexity of the case and the approach taken. Straightforward negotiations or Time to Pay arrangements typically cost less than contested hearings or injunction applications. Most insolvency solicitors will provide a cost estimate at the outset before any work begins.

No. The minimum statutory debt threshold for presenting a winding-up petition is £750. In practice, HMRC petitions almost always involve significantly larger liabilities. If the debt is below this threshold, the petition is not legally valid and can be challenged.

Employees are automatically dismissed when a winding-up order is made. They become creditors of the company and can claim unpaid wages, holiday pay, and redundancy through the National Insurance Fund, subject to statutory limits. The liquidator handles the redundancy process.

Yes, a winding-up petition can be withdrawn, but only with the court’s permission. Full payment of the petition debt and petitioner’s costs is the most common reason. If another creditor has filed a substitution notice, paying the original petitioner alone will not end proceedings.

When a winding-up petition is issued, the Section 127 risk attaches immediately. The company has around seven business days before Gazette advertisement. Once advertised, bank accounts may freeze and the petition becomes publicly visible. Directors who act within the first 24 hours have the most options.

A winding-up petition is issued against the company, not the individual director, so it does not directly appear on a personal credit file.

However, if a winding-up order is made and director conduct is investigated, any resulting disqualification or personal liability findings can have wider personal consequences.

Speak to our winding-up petition solicitors today

If HMRC has presented a winding-up petition against your company, the window to act is short. Early legal advice can be the difference between saving your business and losing it.

Our winding-up petition solicitors can help you:

  • Respond before the deadline. We act fast to protect your position before the petition is advertised and your bank accounts are frozen.
  • Negotiate with HMRC. We deal directly with HMRC to explore Time to Pay arrangements and other solutions that can bring the petition to an end.
  • Apply for urgent court relief. Where needed, we can seek injunctions, validation orders, or adjournments to keep your business operating while a rescue plan is prepared.
  • Protect your position as a director. We advise on your legal obligations and help limit personal exposure to wrongful trading claims, misfeasance, or disqualification proceedings.

For urgent legal advice, contact our HMRC winding up petition solicitors today on 020 7467 3980.

About the Author:

Jeremy Boyle

Head of Insolvency | Summit Law Jeremy qualified as a solicitor in 1993 and is the firm’s founding partner. He specialises in commercial litigation, dispute resolution, fraud and insolvency law for clients in the UK, Gibraltar, Portugal, Spain, and South America. Jeremy is the supervisor of our Insolvency team.