HMRC has refreshed its internal guidance on director disqualification, and the update is worth close attention. It gives a clearer picture of the conduct HMRC now regards as serious enough to justify a referral for disqualification action, including deliberate non-payment of tax, false filings, poor records, misuse of company assets and conduct that harms creditors.
For directors and accountants in England and Wales, this matters because it shows how an apparently ordinary tax problem can become a much more personal issue. What may begin as VAT arrears, PAYE pressure, corporation tax debt or compliance failures can, in the right circumstances, turn into a case about whether a director is fit to be involved in the management of a company at all. Under the Company Directors Disqualification Act 1986, that can lead to a ban of between 2 and 15 years.
The most useful point in HMRC’s updated wording is this: disqualification risk does not only arise from obvious fraud or one dramatic event. More often, it grows out of a pattern of conduct which, taken together, suggests that a director failed to deal properly with the company’s obligations once pressure began to build.
What has HMRC changed in its director disqualification guidance?
The March 2026 update appears to have been designed to make HMRC’s approach more explicit and easier to apply in practice. The guidance now sets out more clearly the kinds of behaviour HMRC sees as relevant when deciding whether a case should be referred onward for potential disqualification proceedings.
That is important because HMRC is not itself the body that disqualifies directors. In England and Wales, proceedings are generally pursued by the Insolvency Service on behalf of the Secretary of State. But HMRC is often one of the most active and best-informed creditors in the background, particularly where there are unpaid taxes, inaccurate filings, missing records or signs that the company was not being run properly as financial pressure increased.
In practical terms, this update is a useful indicator of what kinds of tax-related conduct are now more likely to become director conduct issues, rather than remaining confined to a tax dispute or insolvency shortfall.
What conduct now puts directors most at risk?
The updated guidance points in a fairly clear direction. HMRC is looking not only at whether tax went unpaid, but at how the company was run while that was happening.
- One area of concern is straightforward non-compliance. That includes failures to register or file properly, deliberate inaccuracies in returns, suppression of liabilities, and repeated non-payment of tax without a realistic explanation or credible plan. These are not treated as isolated admin failures if they appear to reflect a broader disregard for the company’s obligations.
- Another area is conduct which suggests the director was acting against the company’s interests, or against the interests of creditors once insolvency risk had emerged. HMRC refers to issues such as personal benefit, illegal dividends, transactions at an undervalue, asset removal and misfeasance. The common theme is not simply technical wrongdoing. It is whether the director appears to have prioritised themselves, or others, at a point when the company was already financially exposed.
There is also a clear focus on repeat or structural behaviour. HMRC refers to practices such as contrived liquidation, repeated phoenix-style activity, poor systems and weak internal controls. That matters because it shows the department is not only interested in one-off decisions. It is also interested in whether the company’s affairs were being managed in a way that made creditor loss or non-compliance more likely over time.
Does unpaid tax on its own put a director at risk of disqualification?
Not automatically, and that distinction matters.
Many companies fall behind with tax because of genuine commercial difficulty. Late payment by customers, overtrading, disputed liabilities, margin pressure and poor forecasting can all contribute to tax arrears. That, on its own, does not mean a director is unfit.
The position changes where unpaid tax starts to reveal something about the way the company was being run.
For example, a company that falls behind with HMRC but continues to file properly, preserve records, take advice and manage creditor risk is in a very different position from one where liabilities are allowed to build while filings become inaccurate, withdrawals continue, and no serious attempt is made to deal with the underlying problem.
That is really the core lesson from the updated guidance. In many disqualification cases, the unpaid tax is not the whole story. It is simply the point at which wider concerns about judgement, governance and creditor treatment begin to surface.
Why do record-keeping and false filings matter so much?
Because in many investigations, the records become the evidence that defines the director’s position.
HMRC places real emphasis on failures to keep, preserve or produce proper accounting and company records, as well as false returns, false accounts and misleading information.
That can be damaging for a simple reason. Even where there may be an explanation for what happened, weak records make it much harder to show that decisions were taken properly and at the right time.
A director may later need to explain why tax was not paid, why particular creditors were prioritised, why money was drawn, or why the company continued to trade. If the records do not support that explanation, the issue can move quickly from a difficult commercial story to a much more serious conduct narrative.
This is one of the reasons disqualification cases often feel harsher in hindsight than they did in real time. Once a company has failed, investigators are not looking at a stressed business trying to survive. They are looking at documents, transactions and omissions against formal duties and creditor outcomes.
What should directors do if they think HMRC may already be building a conduct case?
The first step is not to assume that because the company has already ceased trading, been dissolved or entered insolvency, the personal risk has passed.
- In many cases, the real director exposure only begins after the event, once HMRC, an office-holder or the Insolvency Service starts reconstructing what happened before the collapse. HMRC’s own guidance makes clear that part of its role is to identify cases that may justify a disqualification referral.
- If there is concern about tax arrears, filings, withdrawals, records, asset movements or insolvency-era decision-making, it is usually worth reviewing the position before a formal narrative becomes fixed.
That means understanding not only what happened, but what can now be proved. In practice, that often comes down to the quality of the records, the timing of key decisions, the company’s true financial position at the time, and whether there is any sign that creditor interests were sidelined once the company was in difficulty.
Handled early, these issues can sometimes be explained, narrowed or defended in a much more controlled way. Left alone, they often become harder once the allegations have already been framed by someone else.
The FWJ view
HMRC’s March 2026 update is useful because it confirms something many directors only realise too late: director disqualification risk often begins with ordinary-looking tax non-compliance and only later develops into a personal misconduct case.
For directors and advisers in England and Wales, the practical message is straightforward. If a company has unpaid tax, weak records, questionable filings or signs of insolvency-era decision-making that may not stand up well to later scrutiny, it is better to assess that position early than to wait for HMRC or the Insolvency Service to define it for you.
If there was ever a star rating for law firms, Francis Wilks & Jones would score five stars plus. Professional and pro-active, they were able to understand my problem quickly, provide expert advice, outline a solution and put it into place with a successful outcome. I should have gone to them sooner.
A client we successfully defended in director disqualification and insolvency related proceedings
