What HMRC and Insolvency Service’s new enforcement rules mean for company directors

If your company is facing financial difficulties, the pressure can be overwhelming. And with new enforcement powers introduced for HMRC and the Insolvency Service, directors now face even greater scrutiny.

These changes are designed to tackle abuse and protect creditors, but they also have wider implications for directors who are doing their best in difficult circumstances.

Here’s what you need to know.

What’s changed?

In recent years, HMRC has gained stronger powers to recover unpaid tax from companies that are insolvent or close to insolvency. The Insolvency Service can also investigate directors’ conduct more extensively, even after a company has been dissolved.

Key changes include:

• HMRC as a secondary preferential creditor: This means HMRC now ranks ahead of many other unsecured creditors in an insolvency, giving them greater influence.
• Joint and several liability: In some cases, directors can now be held personally liable for a company’s tax debts, particularly where there’s evidence of tax avoidance, evasion, or repeated insolvencies.
• Powers to investigate dissolved companies: The Insolvency Service can now investigate directors of companies that have been dissolved without formal insolvency, including the use of strike-off procedures.

What does this mean for you as a director?

If you’re trying to trade through tough times in good faith, these changes don’t mean you’re automatically at risk. But they do mean:

• You should be keeping clear, up-to-date financial records
• Avoid any transactions that could be seen as preferring one creditor over another
• Think carefully before taking dividends or increasing director loans when the company is in difficulty

If you’re considering dissolving the company, it’s vital to seek advice first. Dissolution may not protect you from investigation.

Why early advice matters

The earlier you seek advice, the more options are available. If you're unsure whether your company can recover, or if you’re worried about your personal exposure, speak to a licensed insolvency practitioner. They can help you understand your position, the risks, and any steps you can take to protect yourself and your creditors.

This is especially important if you're struggling to pay HMRC or falling behind on tax returns, PAYE, or VAT.

Need help?

We understand that this is a stressful time. Our Insolvency and Recovery team offers confidential, practical advice to directors facing financial pressure. We’ll guide you through your options and help you take control before things escalate.

Get in touch with your usual Larking Gowen contact or email enquiry@larking-gowen.co.uk if you're yet to become a client.

Lee Green