HMRC Arrears and Winding Up Petitions: What Directors Need to Know

How HMRC arrears become a winding up petition. HMRC does not petition on the first missed payment. A petition is typically the end point of a process: arrears build, HMRC issues demands and warning letters, a Time to Pay arrangement may have been offered and broken, and when HMRC concludes the debt will not be resolved through negotiation, it applies to the court for a winding up petition.

What to check first, using your own paperwork: the exact debt figure HMRC has stated (VAT, PAYE, Corporation Tax, or a combination), the date the petition was issued by the court, the date the petition was served on the company, whether a Time to Pay arrangement existed and if so when and why it broke down, and the hearing date stated on the petition.

The statutory minimum for a creditor to petition is a debt exceeding £750, under section 123 of the Insolvency Act 1986. The debt must be genuinely undisputed; if there are substantial grounds to dispute it, even a larger claim can fail.

The date that matters most is not the hearing date. Most directors focus on the hearing date. The more urgent date is the advertisement date, the point at which the petition is published in the London Gazette. Under the Insolvency (England and Wales) Rules 2016, the petition must be advertised no sooner than 7 business days after service on the company, and no later than 7 business days before the hearing. From the moment a petition is advertised, banks routinely freeze the company’s account on becoming aware of it, to protect themselves from liability for transactions made after any winding up order, regardless of the hearing outcome still being pending.

For the company. Once advertised, a winding up petition becomes public and searchable. Suppliers, credit reference agencies, and other creditors can see it. Trading relationships can be affected even before the hearing takes place. If the court makes a winding up order at the hearing, the company enters compulsory liquidation and control passes to the Official Receiver or an appointed liquidator.

For the bank account. Once a bank becomes aware of an advertised petition, it will typically freeze the company account to protect itself from later liability for transactions made after a winding up order (the "dispositions" risk under insolvency law). This can happen before the hearing and before any court order is made, which is why the advertisement date, not the hearing date, is the operational deadline.

For the directors, personally. A winding up petition against the company is not automatically a personal liability event. But the period leading up to and following a petition carries real risk for directors: continuing to trade while insolvent, making payments that unfairly favour one creditor over others (a "preference"), or disposing of company assets can all expose a director to personal liability under the Insolvency Act, and to disqualification proceedings under the Company Directors Disqualification Act. See our guides on Director Disqualification and Insolvency, and Wrongful Trading and Director Conduct.

This is why "wait and see" is the single most costly response. Every week of delay narrows the options available and increases personal exposure.

What genuinely remains possible, even close to a hearing: direct negotiation with HMRC, including revised Time to Pay proposals. Formal application to have the petition dismissed, adjourned, or struck out where valid grounds exist. A Company Voluntary Arrangement (CVA), restructuring the debt while the company continues trading. Business refinancing or asset finance to clear or materially reduce the debt before the hearing. Administration or pre-pack administration, which can halt the petition process entirely and protect the company from further creditor action. A controlled entry into company liquidation, on the director’s own terms, where rescue is genuinely no longer viable.

None of these happen by default. Each requires a decision, and each decision has a narrowing window.

In the next 24 hours: confirm the advertisement date on the petition, not just the hearing date. Do not make selective payments to individual creditors without guidance; this can constitute a preference and create personal risk. Gather the petition itself, any HMRC correspondence and Time to Pay history, the last set of filed accounts, and a current list of company debts and assets. Establish whether the debt figure is accurate and undisputed, or whether there are grounds to challenge it. Speak to an adviser before the hearing date, not the week of it. Every option above narrows as the hearing approaches.

Related situations worth checking now. A winding up petition rarely arrives in isolation. If any of the following also apply to your situation, it changes what needs establishing first: an overdrawn director’s loan account (DLA), a personal guarantee tied to company borrowing, concern about personal bankruptcy alongside company insolvency, or wider financial exposure affecting your family.

What a conversation with Invictus establishes. A direct conversation, not a form and not a triage script, to establish: what stage the petition is genuinely at, what your realistic options are given the timeline, and what personal exposure, if any, needs addressing immediately. You will leave that conversation knowing which of the paths above is actually open to you and what the next honest step is.