Key Takeaways
- An HMRC winding up petition is a serious insolvency procedure that can result in the forced liquidation of your business if you do not act promptly.
- Ignoring a petition may lead to immediate freezing of company bank accounts, severe reputational harm, and loss of operational control.
- Businesses have only seven days from service of a winding up petition before it may be advertised, damaging credit and alerting suppliers.
- Legal grounds exist to stop or challenge an HMRC winding up petition, especially if the debt is disputed or HMRC has made an error.
- Negotiating a payment plan or settlement with HMRC is possible before the court hearing, potentially saving the company from liquidation.
- Seeking urgent, specialist legal help maximises your chances of defending a winding up petition and protecting company assets.
- Directors carry increased legal duties and personal risk during winding up proceedings, including the potential for being held personally liable.
- Go Legal is rated Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 rating from satisfied clients.
How Can You Stop an HMRC Winding Up Petition Against Your Company?
Facing an HMRC winding up petition is one of the most urgent threats a company director can experience. Without swift and decisive legal action, your company bank accounts risk being frozen, operational disruption becomes inevitable, and compulsory liquidation could follow within weeks.
Understanding your options is critical. Whether you dispute the debt, want to negotiate with HMRC, or need to defend your business in court, taking early and expert-led steps will maximise your chances of protecting assets, jobs, and reputation.
What Is an HMRC Winding Up Petition and Why Might Your Business Receive One?
An HMRC winding up petition is a legal move by HM Revenue & Customs to close a company due to unpaid tax debts, usually relating to VAT, PAYE, Corporation Tax, or National Insurance. HMRC is the most frequent petitioner in England & Wales, acting swiftly where debts remain unpaid or arrangements break down.
You may receive an HMRC winding up petition if:
- Significant tax debts remain unpaid (£750 or more)
- The debt is not genuinely disputed
- Previous reminders and enforcement have failed
- No realistic payment plan or arrangement exists
The Insolvency Act 1986 (section 123) requires HMRC to show your company is unable to pay debts as they fall due. Usually, several warnings or statutory demands will precede a winding up petition. Immediate risks include bank account freezes, negative credit reports, loss of trust, and ultimately the loss of control to the Official Receiver or a liquidator.
What Happens If You Ignore a Winding Up Petition From HMRC?
Failing to address an HMRC winding up petition brings immediate and serious consequences. Timeframes are tight, and ignoring the petition allows courts and creditors to pursue winding up aggressively.
Consequences of inaction include:
- The petition is advertised in the London Gazette after 7 days, alerting banks who may freeze company accounts.
- Other creditors can join the petition, increasing overall financial exposure.
- The court may make a winding up order, leading to compulsory liquidation and appointment of the Official Receiver.
- Directors immediately lose all authority over the company.
- Irreparable reputational, trading, and client trust damage.
How Long Do You Have to Act After Receiving an HMRC Winding Up Petition?
Strict legal deadlines apply when your company is served with a winding up petition. The critical timeline starts from the day of service:
- Day of Service: The petition is delivered to your company’s registered office or, less commonly, to a director.
- Within 7 Business Days: You must act before the petition is advertised in the London Gazette. Advertisement typically prompts banks to freeze all company accounts.
- Court Hearing: Set for 8–10 weeks after service, this is when the winding up decision will be made if not resolved beforehand.
Rapid action within the first week is vital—opportunities to pay, negotiate, or challenge diminish rapidly after advertisement.
Go Legal’s expert solicitors can act within hours to assess your case and protect your company’s interests.
How to Stop or Challenge an HMRC Winding Up Petition Step-by-Step
Dealing with an HMRC winding up petition requires clarity, urgency, and the correct legal strategy. Tailored steps depend on whether you dispute the debt, are able to negotiate repayment, or need to challenge the procedures used.
Can You Dispute the Debt or Prove HMRC Made a Mistake?
Where you genuinely dispute the debt or believe HMRC has made an error (for instance, double counting or failing to credit payments received), you can defend the petition. The Civil Procedure Rules (CPR 12) require substantial grounds and supporting evidence. You should:
- Collect all supporting documents—bank statements, correspondence, evidence of payment, or appeals in progress.
- Submit a detailed defence to both the court and HMRC, including a witness statement.
- File your evidence before the hearing to ensure it is fully considered.
How to Negotiate Directly With HMRC Before the Court Hearing
Negotiating with HMRC is often possible, even after a petition is presented. HMRC will withdraw a petition if paid in full (including their legal costs), or if a robust, supported payment plan is agreed.
- Contact the assigned HMRC officer or solicitor swiftly.
- Propose a realistic, affordable payment plan (e.g., partial lump sum with monthly instalments).
- Confirm all agreements and offers in writing for the court’s consideration.
If HMRC accepts your proposal and instructs their lawyers to stand down, the petition can be dismissed before the hearing.
Using Payment Plans or Settlements to Halt Court Action
If you can demonstrate that HMRC supports a settlement plan or that a large payment is imminent, the court may be asked to adjourn or dismiss the winding up petition.
Early and transparent communication with HMRC, secured by specialist legal advice, can make the difference between business rescue and compulsory winding up.
Can You Obtain an Injunction to Stop Advertisement of the Petition?
Applying for an injunction is an emergency legal step that prevents the petition’s publication in the London Gazette, which can trigger immediate account freezes and reputational loss. This is especially useful if there is a disputed debt, defective service, or imminent payment.
- File your injunction application before the 7-day advertisement deadline.
- Provide supporting evidence and a clear explanation of the harm your business will suffer if banks and suppliers become aware of the petition.
- Strict compliance with court rules is essential; late or incomplete applications will be refused.
What Legal Defences Can Stop a Winding Up Order?
Several legal arguments can block an HMRC winding up order. The most effective include:
- Genuine Dispute Over the Debt: If the debt is disputed on substantial, non-trivial grounds, courts will usually dismiss or stay the petition.
“Where the debt is genuinely disputed on substantial grounds, a winding up petition is not appropriate.” – Re Claybridge Shipping SA [1997] 1 BCLC 572
- Full Payment Including Costs: Providing immediate bank evidence of payment may lead the petitioner to withdraw.
- Defective Service: Any error in serving the petition (wrong address, wrong procedure) can void the petition entirely.
- Formal Errors or Technical Defects: Mistakes in naming, sum, statutory language, or procedure, render the petition invalid.
- Genuine Appeal or Tribunal Challenge: Where a tax debt is the subject of a bona fide appeal or review, courts may adjourn or strike out the petition.
Successful defence demands clear, timely evidence and procedural compliance.
Go Legal’s litigation team is experienced in identifying and building such defences at short notice.
What Laws and Deadlines Apply to HMRC Winding Up Petitions?
The legal framework for HMRC winding up petitions is strict and unforgiving:
- Insolvency Act 1986:
- Section 122: Empowers creditors to request a company be wound up for unpaid debts.
- Section 123: Defines inability to pay debts, including failing to comply with a statutory demand for £750+.
- Section 127: Renders transactions invalid after a petition is presented, unless the court approves.
- Insolvency (England and Wales) Rules 2016:
- Govern service, advertisement, hearing timetables, and notification requirements.
- Require the earliest petition advertisement to occur 7 business days after service, but not less than 7 business days before the hearing (Rule 7.10).
- Court Timetables:
- 7-day window from service to advertisement.
- 8–10 week period before the winding up hearing.
Directors must not dispose of assets or favour creditors after the petition—missteps may result in personal liability or criminal sanctions under sections 214 and 238 of the Insolvency Act 1986.
What Do the Courts Say About HMRC Winding Up Petitions?
Courts reiterate that winding up petitions are a remedy of last resort, justified only where debts are undisputed and all legal procedures have been followed.
| Case | Facts | Outcome | Legal Principle |
|---|---|---|---|
| Re A Company (No 0012209 of 1991) | Debt disputed based on substantive evidence | Petition dismissed | Dispute bars winding up |
| Re Claybridge Shipping SA [1997] 1 BCLC 572 | Cross-claims and disputed liability | Petition dismissed | Substantial grounds block petition |
| Re A Company [2010] EWHC 437 (Ch) | Payment after petition but before advertising | Petition withdrawn | Timely settlement can stop process |
Go Legal regularly acts for directors facing disputed petitions, ensuring a high standard of case presentation and legal argument.
How Does a Winding Up Petition Affect Your Business Operations, Credit, and Suppliers?
A winding up petition spells immediate and significant risk for any business:
- Bank Accounts: Banks freeze accounts as soon as the petition is advertised, suspending all company transactions.
- Online Trading and Payment Facilities: Payment gateways and merchant services may be suspended instantly, halting sales.
- Suppliers and Customers: Credit terms can be withdrawn, and vital contracts may be terminated due to insolvency clauses.
- Employees: Uncertainty often causes resignations, with knock-on disruption to operations.
Practical Steps to Preserve Your Position
- Communicate with employees early and honestly; this helps maintain morale.
- Review and prioritise urgent supplier and client contracts—get legal advice on retention-of-title and contractual termination risks.
- Do not sell company assets or pay certain creditors once a petition is served—such transactions may be reversed later.
- Liaise with your bank and provide evidence of pending negotiations or legal proceedings if applicable.
Speaking to Go Legal’s insolvency solicitors can help you rapidly assess risks and move to protect company value.
What Are Directors’ Responsibilities and Personal Risks During Insolvency Proceedings?
Directors’ legal obligations become more complex and more risky after an HMRC winding up petition is served. The law imposes strict duties on directors to act for the benefit of creditors rather than shareholders, and to avoid increasing creditor losses.
Key Personal Risks for Directors
- Wrongful Trading (Insolvency Act 1986 s.214): Directors can be personally liable for company losses if they continue trading when there is no realistic prospect of avoiding insolvent liquidation.
- Preference Claims (s.239): Payments to “preferred” creditors within the two-year period before winding up may be clawed back.
- Transactions at Undervalue (s.238): Sales of assets at below market value after the petition are vulnerable to challenge and reversal.
- Director Disqualification: Reckless or dishonest conduct can lead to a ban from being a company director for up to 15 years under the Company Directors Disqualification Act 1986.
What Are the Alternatives to Winding Up? (CVA, Administration, Voluntary Liquidation)
If repaying your tax debt is not immediately possible, several legal mechanisms exist to prevent compulsory court-ordered liquidation and minimise losses:
Options for Rescuing or Exiting Your Business
- Company Voluntary Arrangement (CVA): Enables a financially viable business to agree a repayment plan with creditors, often paying a reduced sum over 1–5 years. Requires approval from at least 75% (by value) of voting creditors.
- Administration: Places the company into the hands of administrators, shielding it from legal action while they try to rescue or sell all or part of the business. Ideal for larger or complex businesses where rapid rescue is vital.
- Creditors’ Voluntary Liquidation (CVL): Directors can voluntarily wind up an insolvent business, controlling the process and often reducing the risk of personal claims compared to compulsory liquidation.
Go Legal’s insolvency and restructuring specialists can advise on the best option and manage all negotiations with creditors and HMRC.
Our Winning Approach to HMRC Winding Up Petitions
Go Legal’s solicitors are recognised experts in defending and preventing HMRC winding up petitions, with a national reputation and consistent success in even the most time-critical cases. Our approach includes:
- Urgent and Fixed-Fee Reviews: Rapid assessment and action, including evening and weekend service as required.
- Experienced Negotiation: Direct discussions with HMRC and their lawyers to reach settlements or payment plans, even at a late stage.
- Robust Defence Submissions: Detailed evidence gathering and legal documentation for effective court presentation.
- Injunction and Emergency Applications: Fast-track action to prevent petition advertisement and bank account freezes.
- Client-Focused Updates: Real-time, digital dashboards to keep you fully informed at every stage.
- Conditional Fee Arrangements: For qualifying disputed petitions, we may offer no-win-no-fee options to reduce upfront costs.
We are trusted by directors, business owners, and finance professionals nationwide for delivering commercially sound, time-critical solutions.
Frequently Asked Questions
Can HMRC issue a winding up petition for any unpaid tax?
Yes. HMRC can petition for unpaid VAT, PAYE, Corporation Tax, or National Insurance where the debt exceeds £750 and it is not genuinely disputed.
What is the typical timeline from petition service to hearing?
Petitions are served first, and court hearings follow in 8–10 weeks. However, banks may freeze accounts just 7 days after service if the petition is advertised.
Can I stop a winding up petition by paying part of the debt?
Generally, all tax arrears and HMRC’s legal costs must be settled—or an agreed payment plan accepted—before the petition will be withdrawn.
Do I need a solicitor to challenge a winding up petition?
Professional representation vastly improves your prospects of successfully defending or negotiating a petition, especially if time is short or an injunction is needed.
What happens to directors if a winding up order is made?
Directors lose control over all company assets and decision-making powers. They may face investigations, director disqualification, and personal liability claims for any unlawful conduct.
How do I know if the debt is genuinely disputed?
If there is a real factual or legal disagreement with evidence—such as misapplied payments or an active appeal—the petition may be defeated as the debt is not “admitted”.
Can I continue trading after a winding up petition is served?
Trading is technically legal until a winding up order is made, but it carries risk—transactions may be set aside and directors must avoid exacerbating creditor losses.
When should I seek legal advice?
Immediately upon receipt of an HMRC winding up petition. The earlier you act, the greater your options and the lower the risk of irreversible harm.
Get Urgent Legal Support With an HMRC Winding Up Petition Today
Facing an HMRC winding up petition brings immediate risk—to your business, reputation, and personally as a director. Deadlines are strict, options time-limited, and mistakes costly.
Acting early, with specialist guidance from Go Legal, is essential to preserving your business, protecting assets, and limiting personal exposure. Our expert winding up petition solicitors have an outstanding record in stopping petitions, defending directors’ interests, and guiding companies toward successful solutions—even in the most complex or urgent situations.
Call Go Legal on 0207 459 4037 or use our online booking form for a Free Consultation.
