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New taskforce to tackle phoenix firms

27 Nov 2025ByNicola Harley

A new dedicated taskforce is being created to target rogue directors setting up new firms from the ashes of their failed ones to avoid repaying debts.

Under a raft of measures to tackle fraud announced in the Autumn Budget, chancellor Rachel Reeves said she will give the Insolvency Service an extra £25m over the next five years.

The funding will be used to create a new Abusive Phoenixism Taskforce staffed by 50 people investigating suspicious company insolvencies.

The team will target phoenixism ─ which happens when a business becomes insolvent and a new one, with the same directors, is created shortly after, often leaving unpaid debts.

Dave Magrath, director of investigation and enforcement services at the Insolvency Service, said: “This is welcome funding which will help the Insolvency Service tackle rogue directors who abuse the insolvency regime to get out of repaying their debts and keep assets which are not theirs.

“It will allow us to disqualify more directors who are not fulfilling their roles responsibly, which will help us to support legitimate businesses and protect consumers.

“The funding will be used to investigate directors who deliberately liquidate or dissolve their companies to evade tax and write off their debts through practices such as abusive phoenixism.”

The last government attempted to address the issue in 2021, when then business secretary Kwasi Kwarteng introduced laws meaning directors who defraud creditors through insolvency can face bans of up to 15 years, as well as criminal proceedings.

Announcing the policy, business secretary Kwarteng said: “We will not hesitate to disqualify directors who deliberately leave employees and the British taxpayer out of pocket […] Extending powers to investigate directors of dissolved companies means those who have previously been able to avoid their responsibilities will be held to account.”

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However, HMRC’s latest data, covering the 2022/23 tax year, estimates it lost £836m to phoenixing.

Other deterrents announced by Reeves include changes to theCIS system that will see firms face penalties if they “knowingly” enter into transactions connected to construction supply-chain fraud, HMRC said.

The tax body said it will “immediately” revokeGross Payment Status where a business “knew or should have known that the payments made or received were connected with fraudulent evasion of tax”.

The firm, its directors “and other persons connected with the business” would be liable for the lost tax and may face a penalty of up to 30 per cent of that amount. The penalty can also be levied on the company’s directors or others connected to the business, HMRC said.

Reeves also unveiled proposals that will see whistleblowers who report tax evasion rewarded with up to 30 per cent of the funds where HMRC is able to recover over £1.5m in tax.

HMRC said such offences normally involve large companies, wealthy individuals or offshore avoidance schemes.

Paul Dowling, a partner in Leigh Day’s International Corruption and Whistleblowing team, said: “Whistleblowers can face retaliation, blacklisting or reputational damage.

“This proposed HMRC scheme represents a transformative step towards ensuring stolen tax revenue is returned to the public purse. Rewarding those who come forward reflects the critical public service whistleblowers perform in exposing serious wrongdoing.”