Taxpayers miss out on millions after ‘phoenixism’ at UK recruitment firms
Insolvent recruitment businesses shorn of their debts then reacquired from administration by the directors or shareholders that presided over their demise are costing the exchequer tens of millions of pounds in lost taxes, a Guardian analysis suggests.The practice of “phoenixism” – the art of liquidating a company and allowing the directors to rise from the ashes with a new entity, free of debts – is estimated by HM Revenue and Customs (HMRC) to have cost taxpayers about £800m a year.Since the autumn, a series of fresh cases have emerged where staffing businesses have been acquired out of pre-pack administrations – an insolvency process agreed in advance – and continued to trade partly under the control of previous owners or management.In September, a recruitment company called Russell Taylor was acquired from a pre-pack administration for £200,000 plus subsequent instalments totalling £550,000, seemingly leaving debts to HMRC of almost £1m that are not expected to be repaid.The transaction was the second time connected parties had resurrected the business from insolvency during the past decade, after Russell Taylor Management was initially acquired from administration in 2015.
The two insolvencies created three iterations of the business involving the current managing director, Robert Kurton, who the administrator’s report says was previously a director of Russell Taylor Management “between November 2014 and March 2015”, while other corporate filings list him as a 7% shareholder in that business’s successor company, itself acquired out of administration in September,The administrator’s report stated that Kurton “will be a director and shareholder of the [latest] purchaser”,A spokesperson for Russell Taylor Group said: “Robert Kurton previously held a minority shareholding in the business that has entered administration and did not have significant or financial control,“Following the sale, he now leads the new company and will continue to do so going forward,The administration process is ongoing and is being managed by the appointed administrators.
As such, it would be inappropriate to comment further while that process continues,”A food and drink industry specialist, Silven Recruitment, was bought for about £150,000 by Jeremy Pierce in November after the company had called in administrators with it owing HMRC about £600,000,That debt appears to have been cut during administration to about £400,000,Pierce was a director and majority shareholder in Silven, which boasts of clients including Starbucks and Kraft Heinz,He is also a director and majority shareholder of the purchaser of the assets, Northbridge 75.
Pierce rejected any suggestion that this transaction was an example of phoenixism.He said: “I fought exhaustively to avoid administration – capping personal remuneration, servicing debts throughout and exploring every alternative.Administration was a last resort when trading conditions made continuation impossible, not a deliberate strategy.“Multiple parties independently verified that our bid provided the best outcome for creditors while preserving jobs that would otherwise have been lost in liquidation.”In another case Qualiteach, which supplies teachers to schools, was sold for a total of £27,000 to a connected party in September, even though it appeared to owe the taxpayer at least £304,988.
The administrator’s report noted: “[Qualiteach] and [the purchaser] QTEG had a common director and shareholder, Josh Brandon,”Qualiteach did not respond to invitations to comment,Analysis of HMRC data suggests that phoenixism cost the taxpayer about £840m, or 22%, of the £3,8bn of tax losses reported in 2022 to 2023,The emergence of the latest cases adds to the list of 2025 recruitment sector administrations that have raised questions in the industry.
In perhaps the starkest recent example, the Guardian revealed in August that the UK exchequer is chasing about £90m in unpaid taxes after Challenge Recruitment Group, which counted Amazon, Tesco and Sainsbury’s among its top customers, had been rescued from insolvency proceedings in an £18m deal that reimbursed private funders in full.Similarly, Premier Group Recruitment went into administration in September with debts of £2.9m – including £647,000 owed to HMRC.The recruiter’s assets were acquired three days later by a new company, PGGBR Ltd, founded by Andrew Woosnam, Premier’s 99% shareholder.While some in the accounting industry argue that phoenixism allows the exchequer to eventually recoup lost taxes, others find the notion optimistic.
Louise Gracia, a professor of accounting at Warwick Business School, said: “This is often suggested, but I think the reverse is probably true.There is a danger that business will repeat the cycle of phoenixism if they find it to be financially advantageous … There is also the issue of unfair competition.Together these aspects probably outweigh any economic benefits.”
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