The UK government is aggressively pursuing approximately £90 million in unpaid taxes. This massive debt follows the insolvency of a major temporary staffing business. Challenge Recruitment Group recently collapsed into administration. However, The deal was worth £18 million. Consequently, private lenders were repaid in full. Meanwhile, the tax authorities are left chasing a huge sum.
This situation is particularly controversial. Importantly, it appears to be the second time this has happened. The same business previously emerged from insolvency owing millions. Now, the exchequer faces another significant loss. This case highlights the issue of “phoenixism.” This practice involves liquidating a company to shed debt. Then, directors simply restart operations in a new entity.
According to administrators, swipejobs paid £4.9 million for prime contracts. These contracts supplied staff to major UK brands like Tesco. An additional £12.7 million went to secured lenders. Therefore, the pre-pack administration deal prioritized private funders. Unfortunately, creditors like HMRC will likely receive only pennies on the pound.
Four companies within the Challenge group owe HMRC about £34 million. A fifth separate company, TLR White Trading, owes a further £56 million. This debt is for VAT and PAYE taxes. Its sole purpose was handling payroll for the wider business.
This corporate structure raises serious questions. The Cropper brothers were directors of both the failed previous company and Challenge. They then sold a majority stake months before the collapse. Now, the US acquirer has given them consultancy contracts. Unsurprisingly, HMRC is intensifying its focus on such practices.
The Chancellor, Rachel Reeves, faces pressure to act. Her autumn budget may include measures to tackle this loophole. Strengthening public finances is a critical goal. Therefore, recovering such vast unpaid taxes is essential. The government vows to improve collaboration between agencies. Ultimately, stopping phoenixism is a top priority for the exchequer.
For more business updates, visit London Pulse News.
