"Phoenixism is the process of winding up a company and then forming a new company, often controlled by the same individuals, to continue essentially the same business. While this practice can be legitimate at times, it is frequently exploited to evade tax liabilities and other debts deliberately. Some UK companies have undergone multiple 'phoenixing' instances, each time owing millions to HMRC and other creditors."
"The losses to the Exchequer due to Phoenixism were approximately £836 million in 2022/23-45% higher than previously estimated. Although we do not have a precise breakdown of these losses between legitimate and abusive cases, it is reasonable to assume that a significant portion results from abuse, particularly since this practice is common among promoters of tax avoidance schemes."
"Without proper accountability through fines, penalties, or even jail time, tax evaders can continuously 'phoenix' their companies. When Phoenix structures are used to perpetuate marketed tax-avoidance schemes, they serve as a formidable barrier to regulatory intervention, allowing promoters to avoid shutdowns, penalties, and injunctions by repeatedly re-establishing under new corporate entities."
Phoenixism involves winding up a company and establishing a new one, often controlled by identical individuals, to continue the same business operations. While occasionally legitimate, this practice is frequently exploited to deliberately evade tax liabilities and other debts. Some UK companies have engaged in multiple phoenixing instances, each accumulating millions in HMRC and creditor debts. Losses to the Exchequer from phoenixism reached approximately £836 million in 2022/23, 45% higher than previously estimated. A significant portion likely stems from abusive practices, particularly among tax avoidance scheme promoters. HMRC should increase personal liability notices holding directors accountable, implement more director disqualifications, and prosecute repeat offenders. Without proper accountability through fines, penalties, or imprisonment, tax evaders continue phoenixing companies. Phoenix structures also enable promoters to evade regulatory intervention through repeated re-establishment under new corporate entities.
Read at London Business News | Londonlovesbusiness.com
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