HMRC Statutory Demands

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An HMRC statutory demand is a formal notice requiring a company to pay an outstanding tax debt. It is a serious step and often a precursor to a winding up petition. If your business receives a statutory demand, early legal advice is vital. You may be able to challenge the demand, negotiate with HMRC or take action to protect the company from compulsory liquidation.

Failure to respond is likely to result in a winding up petition being issued – which is extremely serious indeed

At a glance

A statutory demand gives HMRC the right to petition for the compulsory liquidation of a company if the debt is not paid. The demand must not be ignored. You may be able to dispute the debt, agree a repayment plan or take steps to prevent further enforcement. We help companies understand the demand, assess the debt and respond in a way that protects the business.

What is an HMRC statutory demand?

A statutory demand is a formal notice served under the Insolvency Act 1986. It requires a company to pay a debt that HMRC believes is due and payable. If the company does not pay the debt within the specified period, HMRC may rely on the demand as evidence that the company is insolvent and apply to the court for a winding up order.

HMRC uses statutory demands where it considers the debt undisputed and believes that earlier attempts to collect the debt have failed.

Summary: A statutory demand is a legal demand for payment and can lead to an HMRC winding up petition if not addressed. Our brilliant team has 20+ years helping deal with demands and diffuse the situation.

Why has HMRC issued a statutory demand to my company?

HMRC issues statutory demands for unpaid VAT, PAYE, corporation tax and other tax liabilities. The demand usually follows reminders, collection efforts or a missed time to pay arrangement. HMRC may also issue a demand if it believes your company has ignored previous correspondence or has a poor compliance record.

In some cases the demand may be issued because HMRC believes the company is insolvent and wants to assess whether it should pursue liquidation.

Summary: HMRC issues statutory demands when it believes a tax debt is unpaid, undisputed and unlikely to be resolved voluntarily. However, even is a demand is served, there is still the opportunity to resolve matters. Our team can help do this.

Is a statutory demand from HMRC serious?

Yes. A statutory demand is one of the final steps in HMRC’s recovery process. If it is not dealt with quickly, HMRC can present a winding up petition. Once a petition is issued, the company’s bank accounts may be frozen and trading may be severely restricted. Our free Frozen Bank Account guide helps explain more.

Ignoring the demand will not make it go away and can place directors at risk of allegations of failing to act in the best interests of creditors.

Summary: Statutory demands are serious and may lead to compulsory liquidation if not addressed.

How long do you have to respond to an HMRC statutory demand?

The company must act promptly once the demand is received. Failure to pay the debt in 18 days or apply for a court injunction can lead to a winding up petition being issued. Early action is vital.

You should check the demand carefully, understand when it was served and calculate the when the 18 day period ends. And at the same time, seek legal advice . Early engagement creates more options for resolving the matter. Leaving it until (or after) the deadline makes it harder to deal with.

Summary: You must respond quickly. The longer a demand is left unanswered, the greater the risk of a winding up petition.

What happens if you ignore a statutory demand from HMRC?

If a statutory demand is ignored, HMRC are likely to issue a winding up petition. Once issued, the petition moves quickly to a court hearing. The company’s bank accounts may be frozen once the petition is advertised. Suppliers, lenders and customers may also become aware of the petition.

A winding up petition is costly, disruptive and difficult to reverse. Avoiding this outcome requires action before the petition is filed.

Summary: Ignoring the demand greatly increases the risk of compulsory liquidation. We can help you avoid this.

Can you challenge or set aside an HMRC statutory demand?

Yes. A company may be able to challenge a statutory demand if the debt is genuinely disputed, if the amount is incorrect or if the demand has been issued in error. A dispute must be genuine and supported by evidence. Simply hoping to negotiate or delay payment is not enough to challenge the demand.

If the debt is disputed or if HMRC has made a mistake, the company can apply for an injunction to stop HMRC issuing a winding up petition. This process must be started quickly after receipt of the statutory demand and our team regularly deals with these situations..

What evidence is needed to dispute a statutory demand?

Evidence may include returns, statements, correspondence with HMRC, bank records, contracts or accounting information. The company must show that the debt is not due or that the amount is wrong. HMRC and the court will expect documentary proof and a clear explanation.

A well prepared response can lead to the demand being withdrawn or reconsidered. But legal advice is required to maximise the chances of success. These are serious applications.

Summary: To dispute a demand you must provide clear and credible evidence that the debt is not owed.

Can you negotiate a time to pay arrangement after receiving a statutory demand?

It may still be possible to negotiate a time to pay arrangement, but HMRC will require full financial disclosure and a convincing repayment plan. HMRC will only agree if it believes the company can meet the payments and that the proposal is in the interests of creditors.

Once a petition has been issued, negotiation becomes more difficult. That is why early engagement is essential. Our head of tax, Andy Lynch, worked at HMRC for 18 years before joining us. His knowledge is vital in helping obtain TTP agreements.

Summary: Time to pay may still be available, but HMRC will expect detailed financial information and a realistic proposal.

What are the next steps if the company cannot pay the amount demanded?

If the company cannot pay the demand, options may include refinancing, selling assets, seeking third party investment or considering formal restructuring options. Directors should take advice on their duties and ensure that all decisions are made in the interests of creditors.

In some cases it may be possible to avoid liquidation through negotiation or by demonstrating that the debt is disputed.

Summary: Companies unable to pay must explore restructuring options quickly and obtain advice on director duties. We have an excellent company rescue team at FWJ who are able to advise on how best to restructure or rescue the company.

How does FWJ help companies facing an HMRC statutory demand?

We review the demand, assess whether the debt is disputed, negotiate with HMRC and advise on the options available to protect the business. If necessary, we help prepare evidence to challenge the demand or to prevent escalation to a winding up petition. Our focus is on providing clear, practical guidance at a critical time.

Summary: FWJ offers clear and experienced support to help companies deal with HMRC statutory demands and avoid unnecessary escalation.

Our brilliant HMRC statutory demand defence team

Our firm has a huge experience in dealing with HMRC statutory demands.

Andy Lynch. Andy is an expert on a wide range of HMRC claims and before joining FWJ, he spent 18 years at HM Customs & Excise in their National Investigation Service. His experience is unrivalled in all types of HMRC claims including HMRC investigation defence, VAT claims, R&D tax credit defence, Account Freezing Orders, Tax Disclosure, Code of Practice 8 & 9 claims, winding up petition defence and much more.
Stephen Downie is a partner with significant tax experience and is also a qualified accountant and previously spent time working at the Insolvency Service.
Anita Sharma. Anita is a Senior Associate specialising in tax litigation and financial disputes with HMRC. She advises high-net-worth individuals and major commercial clients on appeals against HMRC decisions, complex tax assessments, and enforcement proceedings. Anita has secured interim relief following HMRC revocations to keep clients trading during appeals and is known for achieving practical, results-focused outcomes in high-value disputes.
Khaliq Martin. Khaliq is a Senior Paralegal in the tax disputes team assisting on a broad range of HMRC investigation and defence matters. Khaliq draws on his international litigation background and public sector experience to help prepare detailed evidence and submissions for use in appeals and settlement negotiations, ensuring cases are presented clearly, carefully and effectively.