Government pursuit of £90 million in unpaid taxes following rescue of staffing firm Challenge from bankruptcy by HMRC

UK's tax agency seeks £90 million in unpaid taxes from VAT and PAYE following the acquisition of Challenge Recruitment Group, which exited administration in a £18 million pre-package deal to US company swipejobs. This move makes HMRC a significant creditor in the process.

, and Administrator

2025 September 13 . 8:31 PM

2 min read

Unpaid taxes worth £90 million under scrutiny by HMRC following the rescue of staffing firm... — Unpaid taxes worth £90 million under scrutiny by HMRC following the rescue of staffing firm Challenge from bankruptcy

Government pursuit of £90 million in unpaid taxes following rescue of staffing firm Challenge from bankruptcy by HMRC

In her recent spring statement, Chancellor Rachel Reeves announced that the government is taking action against those using contrived corporate insolvencies and dissolutions as a means to evade tax. This move comes as a response to the widespread practice of "phoenixism," where companies are liquidated and re-emerge under new entities, leaving debts, particularly unpaid taxes, behind.

The issue of phoenixism was brought to light in the case of Challenge Recruitment Group. The company, which was rescued from insolvency in an £18 million pre-pack administration deal in 2022, has left HM Revenue & Customs (HMRC) with an estimated £90 million in unpaid taxes. The case underscores the scale of unpaid tax liabilities being written off in insolvencies for HMRC.

The Challenge Recruitment Group is not the only instance of the business collapsing, leaving HMRC with heavy losses. Four Challenge group companies in administration owe HMRC around £34 million. In 2022, when trading as IF Trade Co, the group transferred contracts to Challenge-trg before entering administration with another £34 million owed to the exchequer. The case marks the second time the business has collapsed.

A further £56 million liability sits with TLR White Trading, a company spun out of Challenge in October 2024. TLR White entered insolvency in April 2025, leaving months of VAT and PAYE unpaid. The company that went insolvent in 2025 after being spun off as TLR White Trading from Challenge Group in 2024 is not specified in the provided search results.

The government is taking steps to improve collaboration between HMRC, Companies House, and the Insolvency Service to tackle contrived corporate insolvencies and dissolutions. This collaboration aims to prevent the practice of phoenixism and stop repeat collapses from leaving the taxpayer short-changed.

The urgency of these reforms is emphasized in the Challenge case. Business groups have warned that piling further tax rises onto firms could dampen investment and growth. The Chancellor, Rachel Reeves, is facing pressure to raise additional revenues in the autumn budget to plug a fiscal gap of up to £40bn.

In a positive development, the US workforce platform Swipejobs acquired Challenge's core assets in July. Swipejobs took over contracts with major UK clients including Tesco, Sainsbury's, and Co-op. Administrators FRP confirmed that the deal paid £4.9m for Challenge's contracts and £12.7m to secured lenders Close Brothers and Praetura Asset Finance.

HMRC estimates that phoenixism accounted for 22% of the £3.8bn in tax losses in 2022-23. The government's action against this practice is a significant step towards reducing the tax gap and ensuring fairness for all taxpayers.