HMRC winding-up petitions are surging. Compulsory liquidations hit a 13-year high.

HMRC has been on a winding-up spree. After years of relative forbearance during and after COVID, the tax authority is now aggressively pursuing companies with outstanding tax debts through the courts.

According to the Insolvency Service, compulsory liquidations in 2025 reached 3,730 - the highest annual figure since 2012. HMRC is widely recognised as the single largest petitioner behind these numbers, and industry commentators report that HMRC-initiated winding-up petitions have risen sharply. Total tax debt owed to HMRC reached approximately £43.8 billion at the end of September 2025.

Where the petitions land

While HMRC does not publish a geographic breakdown of petitions, we matched compulsory liquidation Gazette notices against registered office addresses to identify the areas most affected.

The highest concentrations of compulsory liquidations appear in major urban centres with large small-business populations: Birmingham, Manchester, East London, Bradford, and Leicester feature prominently. These areas have high densities of small service, construction, and logistics companies - the sectors most vulnerable to tax debt enforcement.

The tax debt profile

HMRC doesn't publish the amount of tax debt behind each petition. But the companies' filed accounts give us a partial picture. Where accounts were available, the "other creditors" figure - which typically includes tax liabilities - was often in the tens of thousands of pounds, with a long tail of larger debts pulling the average higher.

VAT arrears appear to be a primary driver. Companies that file VAT returns quarterly can accumulate debt faster than those on monthly returns, and HMRC's enforcement tends to lag the debt by 12-18 months.

The Bounce Back hangover

Many of the companies hit by HMRC petitions also carry outstanding Bounce Back Loans. A proportion of compulsorily liquidated companies disclosed BBL liabilities in their most recent accounts.

These companies face a double squeeze: HMRC is enforcing tax debt while the British Business Bank (or its recovery agents) is pursuing BBL repayments. For small companies with thin margins, there's no way to service both.

With tax debt continuing to rise and HMRC dedicating more resources to enforcement, this trend shows no sign of slowing in 2026.