Tens of Millions Slipped Through Cracks as 'Phoenixism' Rackets Recruitment Firms.
A scathing analysis by HM Revenue and Customs (HMRC) suggests that insolvency processes agreed in advance, known as pre-pack administrations, have allowed UK recruitment firms to escape paying tens of millions of pounds in taxes. The practice, dubbed "phoenixism," has seen directors and shareholders reap the benefits while taxpayers foot the bill.
In a series of recent cases, staffing businesses have been acquired from administration and continued to trade under the control of previous owners or management, leaving debts to HMRC unrepaid. One such case involved Russell Taylor, a recruitment company that was initially acquired in 2015 and has since undergone two resurgences, with its current managing director, Robert Kurton, enjoying a lucrative share of the profits.
According to HMRC data, phoenixism has cost taxpayers around £800 million per year, with losses totaling about 22% of reported tax revenues in 2022-23. The practice is estimated to have drained the exchequer of approximately £840 million since 2015, with a notable case involving Challenge Recruitment Group, which secured an £18m deal that reimbursed private funders in full.
Industry experts argue that phoenixism allows businesses to continue trading while dodging their tax liabilities. Louise Gracia, a professor of accounting at Warwick Business School, warns that this practice can lead to "unfair competition" and the "cycle of phoenixism," where businesses repeat the practice if it proves financially advantageous.
While some may view phoenixism as an opportunity for HMRC to eventually recoup lost taxes, others see it as a serious issue that undermines fair competition in the market. As the recruitment sector continues to face scrutiny over its insolvency practices, one thing is clear: taxpayers are paying the price for this 'phoenixing' racket.
A scathing analysis by HM Revenue and Customs (HMRC) suggests that insolvency processes agreed in advance, known as pre-pack administrations, have allowed UK recruitment firms to escape paying tens of millions of pounds in taxes. The practice, dubbed "phoenixism," has seen directors and shareholders reap the benefits while taxpayers foot the bill.
In a series of recent cases, staffing businesses have been acquired from administration and continued to trade under the control of previous owners or management, leaving debts to HMRC unrepaid. One such case involved Russell Taylor, a recruitment company that was initially acquired in 2015 and has since undergone two resurgences, with its current managing director, Robert Kurton, enjoying a lucrative share of the profits.
According to HMRC data, phoenixism has cost taxpayers around £800 million per year, with losses totaling about 22% of reported tax revenues in 2022-23. The practice is estimated to have drained the exchequer of approximately £840 million since 2015, with a notable case involving Challenge Recruitment Group, which secured an £18m deal that reimbursed private funders in full.
Industry experts argue that phoenixism allows businesses to continue trading while dodging their tax liabilities. Louise Gracia, a professor of accounting at Warwick Business School, warns that this practice can lead to "unfair competition" and the "cycle of phoenixism," where businesses repeat the practice if it proves financially advantageous.
While some may view phoenixism as an opportunity for HMRC to eventually recoup lost taxes, others see it as a serious issue that undermines fair competition in the market. As the recruitment sector continues to face scrutiny over its insolvency practices, one thing is clear: taxpayers are paying the price for this 'phoenixing' racket.
! They're basically getting away with tax evasion and it's just not right. I mean, come on, £800 million a year? That's like, a small country or something 
. And what really gets my goat is that they get to reap the benefits while the taxpayers are left holding the bag. It's like, hello! You can't just keep dodging your tax responsibilities and expect everything to be okay 
.
. Industry experts say it's unfair competition and the cycle of phoenixism is real... well, yeah, that sounds about right to me 
. I think HMRC needs to crack down on these firms ASAP and make them pay up 
.
. And what's with this £18m deal for Challenge Recruitment Group? That's just ridiculous 
oh man... I'm so frustrated right now 
thinking about all these recruitment firms getting away with millions of pounds in unpaid taxes 
I mean, what even is the point of having rules if everyone can just find ways to exploit them? 
.
. I mean, come on, can't they just do the right thing and pay their taxes like everyone else ? It's not like it's rocket science 
. These firms need to be held accountable for their actions and we need more regulation to prevent this "phoenixism" racket from happenin' in the first place 
. And what about all these directors and shareholders who are raking in the profits? Shouldn't they be held accountable too? I'm not saying we should crack down hard, but it's time for some serious oversight 
.