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It’s been six months since the Chancellor’s 2025 Spring Statement pledged to crack down on “phoenixism” and “contrived insolvencies.” In this article, we explore what phoenixism is and what steps have been taken since that announcement.
What Is Phoenixism?
Phoenixism refers to the practice where directors start a new company following the insolvency of a previous one. While starting a new company is not inherently wrong, and can even have positive outcomes such as preserving jobs, abusive phoenixism occurs when this tactic is used repeatedly to avoid liabilities, defraud creditors, or misuse public funds.
The Scale of the Problem
HMRC’s latest annual report revealed that 15% of tax revenue losses in 2022–2023, equivalent to £836 million, was linked to phoenix activity.
Despite the scale of the issue, enforcement remains limited. Between 2018 and 2024, only seven directors were disqualified specifically for phoenixism, out of a total of 6,274 disqualifications.
So, What’s Happened in the Last Six Months?
1. New Guidance Issued (June 2025)
The Insolvency Service published guidance titled “When it is not okay to start a new company”, clarifying that restarting a business becomes misconduct when directors:
- Reuse company names unlawfully.
- Are disqualified or bankrupt.
- Use the new company to evade debts or commit fraud.
The guidance also specifically refers to HMRC’s powers to issue “joint and several liability” notices to directors and others associated with the company after it becomes insolvent which makes them personally liable for company debts.
2. Investigations and Enforcement Strategy 2026–2031 (Published July 2025)
The Insolvency Service’s new strategy explicitly names phoenixism abuse as a priority. It outlines:
- A broader corporate enforcement remit.
- Enhanced use of data and AI.
- Closer collaboration with HMRC and Companies House to tackle economic crime.
3. Annual Plan 2025–2026 Commitments (Published July 2025)
The Insolvency Service also committed to:
- Improving director awareness and education around insolvency duties.
- Strengthening enforcement through partnerships and intelligence-led investigations.
- Pursuing criminal sanctions where appropriate.
A Shift Toward Criminal Enforcement?
In a recent case, the Insolvency Service used the Fraud Act 2006 alongside disqualification powers to secure a 2-year 4-month prison sentence and a 15-year director disqualification. While phoenixism was not the sole reason for the conviction, it was a key theme in the case, which involved the fraudulent use of £700,000 across multiple companies.
The phoenix element to this case was specifically highlighted by the Insolvency Service and may signal a shift toward more robust criminal enforcement, though such outcomes remain rare. This stands in stark contrast to the level of COVID fraud related disqualifications and criminal actions.
While the policy direction is clear and the rhetoric strong, practical enforcement of phoenixism remains limited. The Insolvency Service’s new strategy and HMRC’s data highlight the scale of the challenge. But with only seven phoenix-related disqualifications in six years, there’s a long way to go.