UK taxpayers are missing out on tens of millions of pounds as insolvent recruitment firms repeatedly shed their debts and re-emerge under the control of the same directors or shareholders, according to analysis of recent insolvency cases.
The practice, commonly known as phoenixism, involves a company entering administration or liquidation before its assets are sold to a new entity linked to its former owners. The new business continues trading free from historic debts, including unpaid tax liabilities.
HM Revenue and Customs estimates that phoenixism costs the public purse around £800 million each year. Analysis of tax loss data suggests that in 2022 to 2023 alone, the practice accounted for roughly £840 million, or more than a fifth of total UK tax losses.
Since autumn, several recruitment firms have been rescued through pre-pack administrations, a process agreed before insolvency that allows a rapid sale of assets. In many cases, the businesses continued operating with previous management involved, while significant tax debts were left behind.
One recent example involves recruitment company Russell Taylor, which was acquired from a pre-pack administration in September for an initial £200,000, with later payments taking the total to £550,000. The transaction is understood to have left close to £1 million owed to HMRC that is unlikely to be recovered.
The case marked the second time in a decade that a connected party had revived the business following insolvency. Company filings show that the current managing director had previously been a director and shareholder in earlier iterations of the firm and is expected to remain in control of the latest entity.
A spokesperson for Russell Taylor Group said the managing director previously held only a minority stake and did not exercise financial control at the time of insolvency. They added that the administration process remains ongoing and is being overseen by appointed administrators.
Similar patterns have emerged elsewhere in the recruitment industry. Silven Recruitment, which specialises in food and drink staffing and counts major international brands among its clients, entered administration in November owing around £600,000 to HMRC. The business was purchased for approximately £150,000 by its former director and majority shareholder through a new company.
The buyer argued that administration was unavoidable due to difficult trading conditions and said extensive efforts had been made to protect creditors and preserve jobs. He maintained that the deal delivered the best possible outcome compared with liquidation.
Another case involved education recruitment firm Qualiteach, which was sold to a connected party for £27,000 despite appearing to owe more than £300,000 in unpaid tax. Administrators confirmed that both the original company and the purchaser shared the same director and shareholder.
These cases add to a growing list of controversial recruitment sector administrations in 2025. In one of the most high-profile examples, the UK exchequer is pursuing around £90 million in unpaid taxes following the rescue of Challenge Recruitment Group, a major supplier to leading retailers, through a deal that fully repaid private lenders.
Premier Group Recruitment followed a similar path, entering administration with nearly £3 million in debts, including more than £600,000 owed to HMRC. Its assets were acquired days later by a new company established by its majority shareholder.
Some insolvency professionals argue that phoenixism can eventually benefit the economy by keeping businesses trading and protecting jobs, which may lead to future tax payments. However, academic experts remain sceptical.
Louise Gracia, professor of accounting at Warwick Business School, has warned that repeated use of phoenixism can encourage businesses to recycle insolvency as a financial strategy. She said the practice risks distorting competition and may ultimately cost the exchequer more than it recovers, undermining trust in the tax system.
