Taxpayers miss out on millions after ‘phoenixism’ at UK recruitment firms | Business
Bankrupt recruitment businesses that failed to pay their debts and were then taken out of administration by the directors or shareholders who presided over their collapse cost the exchequer tens of millions of pounds in lost tax, a Guardian analysis suggests.
The practice of “phoenixism” – the art of winding up a company and allowing directors to rise from the ashes with a new entity free of debt – is estimated by HM Revenue and Customs (HMRC) to cost taxpayers around £800 million a year.
Since the autumn, a number of new cases have emerged where businesses employing staff have been bought out of pre-packaged administrations (a pre-agreed insolvency process) and continue to trade partly under the control of their previous owners or management.
In September, a recruitment firm called Russell Taylor was bought out of pre-pack administration for £200,000 plus subsequent installments for a total of £550,000, leaving HMRC apparently owed almost £1 million which is not expected to be repaid.
The transaction marks the second time connected parties have saved the business from bankruptcy in the past decade, following Russell Taylor Management’s acquisition from administration in 2015.
The two bankruptcies led to three relapses involving current chief executive Robert Kurton, who was previously a director of Russell Taylor Management “between November 2014 and March 2015”, according to the director’s report; Other corporate filings list Kurton as a 7% shareholder in the business’s successor, which itself was taken out of administration in September.
The director’s report stated that Kurton “will become a director and shareholder of the company.” [latest] buyer”.
A spokesman for Russell Taylor Group said: “Robert Kurton previously held a minority stake in the company, which went into administration and did not have significant or financial control.
“After the sale, he is now the head of the new company and will continue to do so from now on. The management process is ongoing and is managed by appointed managers. Therefore, it would not be appropriate to comment further while the process is ongoing.”
Food and drink industry specialist Silven Recruitment was bought by Jeremy Pierce for around £150,000 in November after the company called in administrators who owed HMRC around £600,000. This debt appears to have been reduced during administration to around £400,000.
Pierce was a director and majority shareholder of Silven, which had clients including Starbucks and Kraft Heinz. It is also a director and majority shareholder of Northbridge 75, which purchased the assets.
Pierce rejected any suggestion that this transaction was an example of Phoenix. He said: “I fought extensively to avoid administration – by limiting my personal remuneration, paying off debts in full and exploring every alternative. “Administration was a last resort, not a deliberate strategy, when trading conditions made continuation impossible.
“Multiple parties have independently confirmed that our offer provides the best outcome for creditors and preserves jobs that would otherwise be lost in liquidation.”
In another case, Qualiteach, which provided teachers for schools, was sold to a linked party for a total of £27,000 in September, despite owing the taxpayer at least £304,988. The manager’s report noted: “[Qualiteach] And [the purchaser] QTEG had a common director and shareholder named Josh Brandon.”
Qualiteach did not respond to invitations to comment.
Analysis of HMRC data, Phoenix cost the taxpayer around £840 millionOf the £3.8bn tax loss reported between 2022 and 2023, or 22%. The emergence of the latest cases has added to the list of 2025 recruitment industry managements that raise question marks in the industry.
In perhaps the most striking recent example, the Guardian revealed in August that the UK exchequer was seeking nearly £90 million in unpaid taxes after Challenge Recruitment Group, which counts Amazon, Tesco and Sainsbury’s among its biggest customers, was rescued from insolvency in an £18 million deal that provided full refunds to private funders.
Similarly, Premier Group Recruitment went into administration in September with debts of £2.9m, including £647,000 owed to HMRC. The employer’s assets were acquired three days later by PGGBR Ltd, a new company formed by Premier’s 99% shareholder Andrew Woosnam.
While some in the accounting industry argue that Phoenix enables the treasury to eventually recoup lost taxes, others see the concept as optimistic.
Louise Gracia, professor of accounting at Warwick Business School, said: “This is often suggested, but I think the opposite is probably true. There is a danger of businesses repeating the Phoenix cycle if they find it financially advantageous… There is also the issue of unfair competition. Together these aspects are likely to outweigh any economic benefit.”
