HMRC winding-up petition — what to do

A winding-up petition is HMRC’s application to the Court to compulsorily liquidate the company. Section 122(1)(f) Insolvency Act 1986 provides the principal ground — inability to pay debts (proved either by statutory demand expired or by judgment-debt unpaid).

HMRC uses petitions where prior collection has failed. Typical HMRC threshold for petitioning: £5,000+ of confirmed debt, although smaller amounts can trigger petition action.

From petition service to compulsory liquidation typically follows this timeline:

• ›Day 0 — petition served on the company.
• ›Day 7 — HMRC advertises the petition in the London Gazette (and sometimes a local newspaper).
• ›Day 7+ — banks become aware of the petition; company accounts typically frozen.
• ›Approximately Day 35–49 — first court hearing.
• ›First hearing — if not paid or contested, the petition is typically adjourned (sometimes for further negotiation) or a winding-up order is made.

Once the winding-up order is made, the Official Receiver is appointed as initial liquidator. The company’s existence as a trading entity ends.

The 7 days between petition service and advertising is the critical period. Three viable options during this window:

Option 1 — Pay HMRC in full

If funds are available, paying HMRC the petition amount (plus their costs — typically £1,000–£2,000) terminates the petition. HMRC will withdraw before advertising. This is the simplest route but requires immediate access to the funds.

Option 2 — Negotiate Time to Pay or settlement

HMRC will sometimes accept a Time to Pay arrangement to suspend the petition — but this typically requires immediate part-payment (often 50%+) and a credible plan for the balance. HMRC’s enforcement teams are less flexible than the standard TTP team. Engage HMRC directly via the Debt Management telephone line — same-day action is possible.

Option 3 — Voluntary procedure (CVL or administration)

Initiating a CVL or administration before HMRC advertises the petition produces a more director-friendly outcome than compulsory liquidation. Once the company is in voluntary procedure, the petition typically falls away (creditors cannot pursue the compulsory route once the company is in voluntary liquidation or administration).

Procedural mechanism: the directors initiate the voluntary procedure (typically CVL via section 100 decision procedure) within the 7-day window. The IP files notice of the voluntary procedure at Court; the compulsory petition is stayed or dismissed. This route requires fast action — typically 5–7 days from director decision to liquidator appointment.

Once advertised, three immediate consequences:

• ›Bank accounts typically frozen — banks see the Gazette notice and freeze the accounts to protect themselves under section 127 IA 1986 (which voids dispositions after petition presentation unless the Court orders otherwise).
• ›Suppliers and customers may withdraw — the Gazette notice is public.
• ›Section 127 effect — any transactions after petition presentation are voidable unless validated by the Court.

The company can still operate technically but practically very limited. The route forward becomes much more constrained.

Where the bank account is frozen and the company needs to continue trading (to preserve value for an eventual sale or rescue), the company can apply to the Court for a validation order under section 127 IA 1986. The validation order authorises specific transactions (typically running the business pending the petition outcome). Validation orders require:

• ›Court application with affidavit evidence.
• ›Demonstration that the proposed transactions benefit creditors as a whole (not just the directors or favoured creditors).
• ›Typical cost: £2,000–£5,000 in legal fees plus Court fee.

Validation orders are useful where there’s a credible rescue or sale prospect — but they’re expensive and don’t always work.

• ›Do not transfer assets out of the company — any transfer after petition presentation is voidable under section 127. Connected-party asset transfers will be unwound by the liquidator.
• ›Do not pay favoured creditors (yourself, family, friendly suppliers) ahead of others — this is a preference under section 239 IA 1986 and will be unwound. The director is personally liable for the preference.
• ›Do not ignore the petition hoping it will go away — HMRC will press on. Inaction makes compulsory liquidation more likely and removes the director’s ability to influence the outcome.

The 7-day window means action is urgent. Initial conversation with a Licensed Insolvency Practitioner is free and typically same-day. For the broader winding-up petition framework, see What is a winding-up petition?. For the CVL procedure that may be the protective response, see CVL pillar. For Time to Pay negotiation, see TTP forecast.