Tax crackdown drives rise in compulsory liquidations
Company directors are “feeling the impact” of HMRC’s crackdown on unpaid taxes as compulsory liquidations spiked by 11 per cent in the year to July 2025, official data has shown.
More bosses wound up their businesses last month than had done so in June, with creditors’ voluntary liquidations still driving insolvencies across the UK.
But out of a total of 2,081 company insolvencies in July, 339 companies were forced to close down, which was 26 per cent higher than the monthly average seen across 2024 when compulsory liquidations were already at their highest levels in ten years.
The Association of Business Recovery Professionals, which is more commonly known as R3, said a more direct approach by HMRC had led to the collapse of more firms.
“Our members are reporting that HMRC is taking a more assertive stance towards enforcement, with greater appetite to recover unpaid taxes through the courts,” R3 president Tom Russell said.
“Directors are feeling the impact of this firmer enforcement, which is adding pressure on businesses already navigating a challenging market.”
HMRC’s move to pursue struggling directors reflects the government’s ambition to cut the tax gap, with an extra £5bn taken in after a clampdown on wealthy individuals’ avoidance.
High taxes hit businesses
Data provided by the Insolvency Service also showed a slight increase in the number of administrations compared to a year before while restructuring plans were registered for 13 companies.
The sectors most affected by insolvencies remained construction, and wholesale and retail trade, with hikes to employment taxes cited as a key factor leading to insolvencies.
Manufacturing made up eight per cent of insolvencies, though separate research by Cynergy Bank on ONS data showed that there has been a net loss of 13,520 manufacturing businesses over the past four years, leading to a decrease in around 2,000 jobs across the industry.
Daniel Staunton, a senior associate in the insolvency team at Kingsley Napley, said the figures published by the Insolvency Service were “much ado about nothing” given “no sharp peaks and troughs” in companies winding up.
“Inflation has crept up but the Bank of England acted quickly again to cut interest rates so the total insolvency figures are likely to remain stable,” Staunton said.
Low business confidence was also hurting businesses on the brink of collapse, according to Nick O’Reilly, restructuring director at the advisory firm MHA.
“While increased costs, global trade tensions, and uncertainty ahead of the Autumn Budget mean that this is not an ideal environment for businesses, there is also evidence that business owners have convinced themselves that the situation is more dire than it is,” he said.