HM Revenue & Customs faces a staggering £90 million shortfall as temporary staffing giant Challenge Recruitment Group collapses into administration, marking the second major tax evasion case involving the same business directors within three years.
Massive Unpaid Taxes Exposed in Administration
HMRC aggressively pursues approximately £90 million in unpaid taxes following Challenge Recruitment Group’s pre-pack administration deal. Consequently, the US workforce platform swipejobs acquired core assets for £18 million in July. Major UK clients including Tesco, Sainsbury’s and Co-op transferred contracts seamlessly during this process.
Administration Deal Leaves Tax Authorities Shortchanged
Administrators FRP confirmed secured lenders received full repayment totaling £12.7 million. However, HMRC and other unsecured creditors recover only minimal amounts. Four Challenge group companies owe HMRC around £34 million directly. Additionally, TLR White Trading, spun out in October 2024, carries a further £56 million liability for unpaid VAT and PAYE.
Pattern of Phoenixism Emerges
This case represents the second collapse involving the same business operations. Previously trading as IF Trade Co in 2022, the group transferred contracts before administration with another £34 million tax debt. Directors Richard and Thomas Cropper sold 75% of Challenge to an employee ownership trust months before the latest collapse.
Government Response to Tax Evasion
HMRC estimates phoenixism accounted for 22% of the £3.8bn tax losses in 2022–23. A spokesperson confirmed: “The government is taking action to improve collaboration between HMRC, Companies House and the Insolvency Service to tackle those using contrived corporate insolvencies.”
Broader Implications for Business Taxation
The case highlights growing concerns about unpaid taxes during corporate insolvencies. Chancellor Rachel Reeves faces pressure to address fiscal gaps while business groups warn against additional tax burdens that might dampen investment and economic growth.
Frequently Asked Questions
What is phoenixism in business?
Phoenixism occurs when companies liquidate and re-emerge under new entities, leaving behind debts including unpaid taxes.
How much does HMRC seek from Challenge Recruitment?
HMRC pursues approximately £90 million in unpaid taxes across multiple related companies.
Which major retailers were affected?
Tesco, Sainsbury’s and Co-op had contracts transferred to swipejobs during the administration process.
What happened to the company directors?
Brothers Richard and Thomas Cropper sold their majority stake months before administration and secured consultancy roles with the new owners.
How much did secured lenders recover?
Close Brothers and Praetura Asset Finance received full repayment totaling £12.7 million.
What government action is planned?
Enhanced collaboration between HMRC, Companies House and the Insolvency Service to combat tax evasion through corporate insolvencies.
