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femi@loftusstowe.com|Companies in England and Wales
An HMRC winding up petition is HMRC asking the court to close the company over unpaid business tax. HMRC usually advertises it 7 business days before the hearing, and the bank usually freezes the account once it does. I am Femi Ogunshakin, a solicitor and former HMRC inspector. Your first 30-minute consultation is free.
Most of the petitions I deal with are brought by HMRC. My time as an HMRC inspector means I know how the petitioning side builds and runs these cases.
HMRC says it will tell you before it takes action such as closing down your company. Its manual describes an insolvency warning letter that warns insolvency is the next step and gives a chance to pay first.
If a Time to Pay arrangement fails and insolvency is the next step, HMRC's manual tells staff to use that letter to cancel the arrangement. Insolvency action for companies in England and Wales is then taken by HMRC's Enforcement and Insolvency Services team in Cardiff.
The court can wind a company up if it is unable to pay its debts. HMRC does not have to serve a statutory demand first. It can instead prove to the court that the company cannot pay its debts as they fall due.
From the day the petition is presented, any payment the company makes is void if a winding up order follows, unless the court orders otherwise. That is the rule a validation order deals with.
The petition moves the debt out of ordinary collection and into the court's hands.
Payments made after presentation are void if the company is wound up, unless the court orders otherwise. Banks usually freeze the account once the petition is advertised.
HMRC's manual tells its debt staff not to start enforcement proceedings against a company once a winding up petition is presented. The petition becomes the route.
Once the petition is advertised, other creditors can give notice to support it. In some situations the court can substitute one of them as petitioner.
Paying HMRC late in the process may not end the petition if another creditor has stepped in.
HMRC usually waits until the last permitted date. Other petitioners sometimes advertise sooner.
HMRC says that if you cannot pay a tax bill in full, you may be able to pay it in instalments. In practice HMRC usually only agrees Time to Pay before it presents the petition. Once the petition is presented, HMRC is reluctant but will look at a proposal case by case. Agreements after a petition do happen, but they are rare. Do not plan around one.
HMRC's manual tells its staff to negotiate Time to Pay offers by phone where possible. It lists what they consider:
Have management accounts and a cash flow forecast ready before you make an offer. The same papers support a validation order application.
If you have been served today, get in touch today. The window is measured in business days.
The company can apply to the court for an order that payments out of its bank account are not void if it is wound up. HMRC, as petitioner, must normally be given notice of the application.
The court must be satisfied the company is solvent, or that the payments will not prejudice the unsecured creditors as a class. HMRC rarely objects to a validation application. It usually stays neutral and leaves the judge to decide on the merits. HMRC has no say over the evidence. What the court needs is set by statute and the Insolvency Rules.
A validation order does not settle the tax debt or stop the hearing. Read more on stopping the advertisement or how a winding up petition works.
If payroll is days away, say so when you call. I will tell you straight away whether the timing works.
Yes. HMRC says that if you do not contact it or cannot agree a payment plan, it may close down your company over a business tax. The court can wind a company up if it is unable to pay its debts.
It does not have to. A statutory demand is one way to show the company cannot pay, but proving it to the court is another. HMRC's manual does describe a warning letter that gives a chance to pay before insolvency action.
The £750 figure in the Insolvency Act applies to the statutory demand route. The route of proving the company cannot pay states no minimum sum. In my experience the court will reject a petition for a debt under £750. I do not expect HMRC to try one, as the court would treat it as an abuse of process.
The advert cannot appear until 7 clear business days after service, not counting the day of service. It must appear at least 7 business days before the hearing. HMRC usually waits until that last permitted date.
HMRC says that if you cannot pay in full, you may be able to set up a payment plan. Time to Pay is usually only agreed before HMRC presents the petition. After that HMRC is reluctant but considers each case on its facts. Agreements at that stage are rare, so do not rely on one.
HMRC must normally be given notice of the application as petitioner. The court decides on the evidence whether the company is solvent, or whether the payments will not prejudice unsecured creditors as a class. HMRC rarely opposes. It usually stays neutral and leaves the decision to the judge.
Depending on the position, the company may be able to dispute the debt, agree terms with HMRC, or apply to restrain the advertisement. At the hearing the court can dismiss the petition, adjourn it or make a winding up order.
Usually, once the petition is advertised in the Gazette. Banks usually freeze the account on the day of the notice or within about 48 hours.
A free 30-minute consultation with me to explore your options and protect your business.
The fixed fee for a validation order application is £10,000 to £15,000 plus VAT, depending on the size of the petition debt. See the full fee breakdown.
Who you will deal with
Femi O. Ogunshakin
Solicitor, Tax Adviser and Former HMRC Inspector
Validation order applications are a large part of my practice. Most of the petitions I deal with are brought by HMRC, and my time as an HMRC inspector means I know how the petitioning side builds and runs these cases.
You will deal with me directly rather than with an introducer or a case handler. The work is carried out through Nexa Law, where I practise. The first 30 minutes are free.
If your company has received a winding up petition, it is important to act quickly. Call or email me to discuss how to apply for a validation order from the insolvency courts. I offer a free 30-minute consultation to help you explore your options and protect your business.
07867 795 439
Email femi@loftusstowe.com
Prefer a set time? Book your free 30-minute consultation.
Call-back requests are returned the same working day, usually within a few hours. Requests sent out of hours are returned the next working morning.
