HMRC loses more than £800m to small business 'phoenixing'

HM Revenue & Customs (HMRC) has suffered a loss of over £800m, a figure higher than previously estimated, due to a tax loophole exploited by small businesses in the UK.

This loophole, known as 'phoenixing', involves companies repeatedly liquidating and then re-establishing themselves as new, debt-free entities, as reported by City AM .

The tax authority reported a loss of £836m to this practice in the 2022-23 tax year, the most recent period for which data is available. This figure is 45% higher than the £570m loss estimated in earlier reports.

HMRC attributes this loss to delays in companies declaring insolvency during the pandemic era.

Phoenixing was responsible for approximately one-fifth of HMRC's tax losses, i.e., money owed but uncollectable, for the 2022-23 tax year.

HMRC is