HM Revenue & Customs (HMRC) is pursuing around £90 million in unpaid taxes linked to temporary staffing company Challenge Recruitment Group, which collapsed earlier this year before being rescued in an £18 million pre-pack administration deal.
In July, US workforce platform swipejobs acquired Challenge’s core assets, including contracts with major supermarket chains Tesco, Sainsbury’s and Co-op. The transaction, managed by administrators FRP, included £4.9 million for the contracts and £12.7 million to secured lenders Close Brothers and Praetura Asset Finance, enabling both private funders to be repaid in full.
Unsecured creditors, however, are expected to recover only a small fraction of what they are owed. FRP’s report revealed that four Challenge group companies in administration owe HMRC approximately £34 million. In addition, a further £56 million liability is tied to TLR White Trading, a spin-off business created in October 2024 to manage payroll and staffing costs. TLR White itself entered insolvency in April 2025, leaving several months of VAT and PAYE unpaid.
This is not the first time the business has collapsed with significant debts to the exchequer. In 2022, the group — then trading as IF Trade Co — transferred contracts to Challenge-trg before entering administration, leaving another £34 million unpaid to HMRC.
The companies were overseen by brothers Richard and Thomas Cropper, who directed both IF Trade and Challenge. In October 2024, nine months before the latest collapse, the Croppers sold 75% of Challenge to an employee ownership trust. Despite the administration, both have remained involved, retained on six-month consultancy contracts with swipejobs.
The saga has reignited concerns over “phoenixism,” a practice in which businesses are wound up and reconstituted under new entities, often leaving substantial debts — particularly tax liabilities — behind. HMRC estimates that phoenixism was responsible for around 22% of the £3.8 billion in tax losses recorded in the 2022–23 financial year.
An HMRC spokesperson said the government is stepping up measures to address the problem: “As the chancellor announced in her spring statement, the government is taking action to improve collaboration between HMRC, Companies House and the Insolvency Service to tackle those using contrived corporate insolvencies and dissolutions — so-called ‘phoenixism’ — to evade tax.”
The case comes at a politically sensitive moment for Chancellor Rachel Reeves, who is under pressure to raise additional revenues in her autumn budget to close a fiscal gap estimated at up to £40 billion. Business groups have warned that increasing the tax burden on companies could stifle investment and growth.
For HMRC, the Challenge affair highlights the financial strain caused by repeat corporate collapses, underlining the urgency of reforms to prevent further unpaid tax liabilities from being written off at the taxpayer’s expense.
Track inflation, costs, and economic pressures facing businesses on Heraldberg.
