What happens if HMRC issues a winding up petition against your company?

Receiving a winding up petition from HM Revenue and Customs (HMRC) is one of the most serious situations a company director can face. The fear of losing a business you have built, and the uncertainty about what comes next, is entirely understandable. What matters most at this stage is knowing exactly what the petition means, how the process unfolds, and what options remain open to you.

At Isadore Goldman, we deal exclusively with insolvency. Our solicitors provide clear and pragmatic advice to directors facing HMRC petitions, helping you navigate the process with confidence and protecting your interests wherever possible.

What is an HMRC winding up petition?

A winding up petition is a formal court application by a creditor seeking to have a company wound up (brought to an end) on the grounds that it cannot pay its debts. HMRC uses this mechanism under section 122(1)(f) of the Insolvency Act 1986. The minimum debt required for a petition to be presented is £750, although HMRC will invariably be owed considerably more before taking this step. HMRC is widely regarded as the most aggressive petitioning creditor in the UK.

Why HMRC has issued a petition against your company

HMRC is a creditor with wide-ranging debt recovery and enforcement powers, and a winding up petition represents the final stage of a structured escalation process. Common triggers include unpaid Pay As You Earn (PAYE) and National Insurance Contributions (NICs), Value Added Tax (VAT) arrears, and outstanding Corporation Tax.

Before filing a petition, HMRC will typically have issued warning letters and formal enforcement notices. It may also have offered or previously agreed a Time to Pay (TTP) arrangement, a form of deferred repayment, that has since been broken or refused. Once HMRC concludes that there is no realistic prospect of voluntary repayment, it will proceed to court.

The immediate consequences for your company

The consequences of a winding up petition begin before any hearing. Most banks freeze company accounts as soon as they become aware of a petition, even before its advertisement in The London Gazette, which can halt trading almost immediately.

Under section 127 of the Insolvency Act 1986, any disposal of company assets or payments made after the petition is presented are void unless sanctioned by the court. Suppliers and customers will also react sharply once the petition becomes public, and your duties as a director shift to prioritising creditor interests the moment the company is insolvent.

The HMRC winding up petition timeline

The key stages in the process are:

• Petition filed and served: HMRC files the petition with the court and serves a copy on the company at its registered office.
• Seven-day grace period: HMRC must wait at least seven working days before advertising the petition.
• Advertisement in The London Gazette: once advertised, the petition becomes public and most banks will freeze accounts without delay.
• Hearing listed: the court typically lists the hearing six to 10 weeks after the petition is issued.
• Possible adjournments: the court may adjourn to allow negotiations or to accommodate a formal insolvency process.
• Winding up order: if no resolution is reached, the court may make a winding up order at the hearing.

The seven-day window between service and advertisement is often the most critical period for a director seeking to resolve the position.

What happens at the winding up petition hearing

The hearing takes place in the Insolvency and Companies Court (for companies with paid-up share capital of £120,000 or above) or at a district registry. HMRC will attend as petitioner, and other creditors who have become aware of the petition may appear as supporting creditors.

At the hearing, the court may make a winding up order, dismiss or strike out the petition, adjourn proceedings, or note a withdrawal where the debt has been settled. The outcome depends on the steps taken before the hearing date and the strength of any case advanced on the company’s behalf.

What happens if the court grants the winding up order

A winding up order results in compulsory liquidation. The Official Receiver (a government-appointed insolvency officer) is appointed immediately to take control of the company. In more complex cases, a licensed insolvency practitioner may later be appointed as liquidator.

The liquidator will realise the company’s assets and distribute proceeds to creditors in the statutory order of priority. The liquidator is also required to investigate and report on the conduct of directors to the Secretary of State, who will consider whether to bring disqualification proceedings. Employees are made redundant, and the company is struck off the register once the process is complete.

Personal risk to you as a director

The risks extend well beyond the company itself:

• Wrongful trading (section 214, Insolvency Act 1986): if you continued to trade when you knew, or ought to have known, that there was no reasonable prospect of avoiding insolvency, you may be held personally liable for any increase in the company’s net deficiency.
• Misfeasance (section 212, Insolvency Act 1986): directors can be held personally liable for misapplication of company assets or breach of fiduciary duty.
• Director disqualification: the liquidator’s report may trigger disqualification proceedings, with a potential ban of up to 15 years.
• Overdrawn director loan accounts: any loan balance owed by you to the company becomes immediately repayable to the liquidator.
• Joint and Several Liability Notices: HMRC has expanded powers to issue these notices, making directors personally liable where there is evidence of tax avoidance, evasion, or a pattern of repeated insolvency.

Your options before the hearing

Several routes remain available before the hearing, though the window for each narrows with every day that passes:

• Pay the debt in full: HMRC will typically consent to withdraw the petition upon receipt of cleared funds.
• Negotiate a fresh Time to Pay arrangement: considerably more difficult once a petition is live, but may be possiblewhere genuine engagement can be demonstrated.
• Apply for a validation order: a court order permitting specific transactions that would otherwise be void under section 127, allowing the company to continue trading legitimately while matters are resolved.
• Propose a voluntary arrangement: a Company Voluntary Arrangement (CVA) is a formal agreement with creditors supervised by an insolvency practitioner, which may persuade HMRC to adjourn or withdraw.
• Enter administration: administration imposes an automatic moratorium (a legal freeze on all creditor action, including the petition), providing breathing space to restructure.
• Apply to dismiss or strike out: where the debt is genuinely disputed on substantial grounds, the court may dismiss the petition or grant an injunction to restrain its advertisement.

Can a winding up petition be stopped or dismissed?

Yes, in certain circumstances. The main grounds include:

• Payment of the full debt and costs
• Provision of acceptable security for the amount claimed
• A genuine and substantial dispute as to whether the debt is owed
• Abuse of process by HMRC, for example where procedural requirements have not been correctly followed
• The company entering a formal insolvency process such as administration, which imposes an automatic stay

Where the petition has not yet been advertised and there are grounds to challenge it, it may be possible to apply for an injunction to restrain advertisement. Speed is essential.

Why you need to act within days, not weeks

Every day that passes after a winding up petition is served reduces the options available. Once the petition is advertised in The London Gazette, a bank account freeze becomes almost inevitable, supplier and customer relationships break down, and the ability to continue trading collapses rapidly. The window to propose a CVA, enter administration, or obtain a validation order is significantly narrower after advertisement.

Directors who seek immediate, expert advice are far better placed to protect the business, safeguard employees, and limit their own personal exposure than those who delay.

Contact our solicitors for advice on an HMRC winding up petition

Isadore Goldman deals exclusively with insolvency.

Our solicitors have extensive experience advising directors at every stage of the HMRC winding up petition process, from negotiating TTP arrangements and applying for validation orders..

With offices in London, Norwich and Portsmouth, we are well placed to provide immediate, expert advice wherever you are based. To arrange an appointment, please email us at info@isadoregoldman.com.