HMRC Winding-Up Petitions / Statutory Demand

The presentation of a winding up petition is the first stage of compulsory liquidation. It means that the petitioner (creditor) is attempting to have the company compulsorily shut down.  If a winding up petition is granted by the Court it will ordinarily signal the beginning of the end for the company. Legal advice should be taken as quickly as practicable.

Will HMRC serve a Statutory Demand before a Winding-up Petition?

Her Majesty’s Revenue and Customs (HMRC), the governmental body responsible for collecting taxes in the UK, follows a standard procedure when pursuing unpaid taxes from a company or individual. This procedure involves several steps, one of which is the issuance of a Statutory Demand.

A Statutory Demand is a formal notice that serves as a precursor to more serious legal action such as the compulsory winding-up of a company. It is a written demand for the payment of a debt that outlines specific details about the amount owed and provides a specified period for the debtor to respond or settle the debt.

Before HMRC takes further legal steps, such as filing a winding-up petition, they first issue a Statutory Demand. A winding-up petition is a legal request to the court for the compulsory liquidation of a company. It is a serious step that, if granted, leads to the closure and dissolution of the company, with its assets being distributed to creditors.

By issuing a Statutory Demand prior to a winding-up petition, HMRC aims to give the debtor an opportunity to address the outstanding debt and potentially avoid more severe legal consequences. This initial warning allows the debtor to either make payment arrangements or dispute the debt if they believe there are valid grounds to do so.

In summary, the process starts with HMRC issuing a Statutory Demand, providing the debtor with an opportunity to address the debt. If the debt remains unresolved, HMRC may then proceed with more severe legal action, such as filing a winding-up petition.

HMRC Winding-Up Petitions

A winding up petition from Her Majesty’s Revenue and Customs (HMRC) is just the same as from any other creditor. A large number of winding up petitions are often filed by HMRC as a result of unpaid taxes. HMRC wound up 4,308 companies last year (2019) which is an increase of 6% on 2018. 

When HMRC issues a winding up petition it is normally as a last resort, with no other option but to shut the company down. If the company has secured creditors, it is by no means certain that HMRC (who are unsecured creditors) will recover all (if any) of the monies they are owed.

However, on 6 April 2020 the House of Commons intends to amend insolvency legislation which will return HMRC to their previous status as preferential creditors.

The debt on a HMRC petition will be for a sum of at least £750, and will usually be in the order of tens to hundreds of thousands of pounds. HMRC will generally give the company notice that the amount is now overdue and should be paid as soon as possible. If the amount is not paid, HMRC will serve a statutory demand and the company will then have 7 days to pay its debts to HMRC.

The monies owed to HMRC could be for the following:

  • VAT returns;
  • Unpaid VAT assessments;
  • PAYE payments;
  • Employer’s National Insurance Contributions; and
  • Unpaid corporation tax.

HMRC Winding-Up Petition Procedure

Winding up petitions can be issued by HMRC if they are owed £750 or more and the debt is undisputed. Winding up petitions are likely to be served in the High Court, namely the Chancery Division (Companies Court) based at the Royal Courts of Justice (Rolls Building) in London.  

Once a winding up petition is issued by HMRC, it is then served on the company usually by a process server visiting the company’s registered office address or sometimes by first class post.

Can I challenge a winding-up petition from HMRC?

In short yes. If your company has been served with a winding-up petition from HMRC, you have the right to challenge it if any of the following grounds apply:

  • The debt alleged in the petition is genuinely disputed on substantial grounds by the company;
  • The company has a genuine right to set-off against the creditor which exceeds the amount of monies claimed in the petition; or
  • Certain other limited circumstances (for example where the Company is likely to become insolvent or there has been a procedural error or delay).

Advertising the Winding-Up Petition

Once a winding up petition has been served, the company has seven business days from the day on which the petition is served to deal with the petition before notice of petition is placed in the London Gazette by HMRC. Once the petition has been advertised it is likely to come to the attention of the company’s bank, creditors employees, suppliers and customers.

Unfreezing of Company Assets: Validation Orders  

Where the company’s bank accounts have been frozen, an application for an order validating the disposition of the company’s assets (known as a validation order) should be made. Considering the application is successful, a validation order will unfreeze the company’s accounts and allow the company to continue trading. The court must be satisfied that the proposed disposals will be at a proper value.

Can you represent me at my Winding-up petition hearing?

Yes. The rules surrounding insolvency are technical and it is unlikely that a someone not versed in personal insolvency laws will achieve a successful outcome. Winding up particularly and insolvency in general is a niche practice area – indeed many solicitors in general practice will rarely have experience in this discipline.

Do not underestimate the severe consequences that winding up a company entails. It is likely that seeking the advice of a specialist insolvency lawyer will be of far more benefit to you than ignoring impending proceedings or seeking to conduct the litigation yourself as a layman.

Our team is made of highly experienced and tough negotiators that will fight to get the best results for our clients. We have years of experience of negotiating with creditors and debtors alike from large multi-million pound cases to smaller matters with equally large consequences for the person involved.

HMRC Petition Advice

If you have received a HMRC winding up petition we are able to provide urgent help, advice or representation. We provide expert legal advice from our team of leading HMRC Petition Solicitors or Barristers.

Please note: If you have been warned about your file being passed to HM Revenue & Customs’ Solicitor’s Office or have been served a statutory demand or petition do not delay in contacting us as your matter can be handled more effectively the sooner you contact us. 

Expert London Tax Investigation Lawyers

We can help you at every stage of any HMRC Investigation. Our legal team has first-hand experience and knowledge of how HMRC works at every level, in particular in relation to their legal and complaints teams. 

We provide the very best representation in negotiations with HMRC and defending all allegations in a tax enquiry, tax fraud investigation, criminal tax evasion or similar investigation. 

We have a track record of successfully challenging HMRC decisions and will assist you and appoint forensic support where necessary to provide expert reports. Unlike accountant tax advisers we analyse the merits at the outset and keep them under review and we won’t have to hand over all your confidential data as lawyers have legal advice privilege unlike accountants.

Our specialist Tax Solicitors and Barristers deliver expert technical knowledge, strong negotiation skills and advice which can make a pronounced difference to eventual tax penalties, charges and liability.

We provide tax advice and representation against HMRC. Get in touch with our expert tax solicitors and barristers so we can get you a result. We provide a quick no cost initial telephone case review to establish whether or not we can help you; just call one of our team on 02071830529.

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Our lawyers have a track record of successfully challenging HMRC decisions and will assist you to get an optimal result. We analyse the merits at the very outset in an initial video conference together with leading (ex-HMRC and Big 4) tax litigation counsel. We provide urgent advice and representation to clients from our unique expert team of established Tax specialist solicitors and barristers with a proven track record of delivering results. Call us on +442071830529, or email [email protected].

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