HMRC Winding Up Petition Served on Moda in Pelle (Unpaid Debt)

The British retail sector continues to face severe financial headwinds, with rising costs, subdued consumer spending, and structural market pressures combining to push even established brands to the edge of insolvency. The latest casualty to make headlines is Moda in Pelle, a Leeds-founded footwear retailer with over five decades of trading history, which has been served with a winding up petition by HM Revenue and Customs over unpaid debts. The petition follows internal disclosures to staff that the business had engaged external advisers to review its financial position and solvency. For any company that finds itself in similar circumstances, the consequences of a winding up petition are immediate and potentially irreversible, and this is why instructing specialist insolvency lawyers at the earliest possible stage is not a luxury but a necessity.

HMRC Targets Moda in Pelle’s Payroll Company

The winding up petition was not served on Moda in Pelle’s main trading entity but on MIP Employees 1975, the subsidiary within the group’s corporate structure responsible for administering the brand’s payroll. This distinction matters enormously. When HMRC targets a payroll entity, it is typically because PAYE income tax deductions and National Insurance contributions have been collected from employees but not remitted to the Revenue. In law, these sums are held on trust for the Crown and HMRC treats their non-payment with particular severity, often bypassing the statutory demand stage and proceeding directly to petition.

The petition followed a period in which the company had already acknowledged financial strain to its workforce, with internal communications confirming that external advisers had been appointed to review solvency. By the time a petition is served, earlier engagement attempts by HMRC have ordinarily been exhausted. This pattern demonstrates why directors must act at the first sign of tax arrears accumulating rather than waiting for formal enforcement to begin. Proactive engagement with HMRC through a Time to Pay arrangement, supported by expert legal advice, can in many cases prevent a petition from ever being presented.

History of Financial Difficulty

Moda in Pelle’s current difficulties do not arise in isolation. The business has passed through formal insolvency proceedings on multiple previous occasions, surviving each time through pre-pack administration sales that preserved jobs and continued the brand’s trading. On the most recent prior occasion, administrators were appointed after the business experienced ongoing losses and cash flow difficulties that worsened over the Christmas trading period. A pattern of repeated administration and rescue raises important questions about the structural viability of the underlying business model and the robustness of the financial governance arrangements put in place following each recovery. For creditors and directors alike, this history underscores that past rescue does not guarantee future survival, and that each new period of financial difficulty must be addressed with fresh urgency and proper professional support.

A Recent Change of Ownership

In December 2025, a majority stake in Moda in Pelle was acquired by GlobalTech Corporation, a United States-based technology holding company listed on the OTC markets. The transaction was structured not as a cash acquisition but as a share exchange, with the consideration comprising shares and convertible preferred stock in GlobalTech. This means that the acquisition did not inject fresh working capital into the Moda in Pelle business. Incoming shareholders do not extinguish existing tax liabilities, and an acquisition structured around equity consideration rather than cash leaves the underlying business dependent on its own trading cash flows to meet its obligations. Where those cash flows are insufficient to service accumulated HMRC arrears, a petition can follow within months of a transaction closing, as has proved to be the case here. This is a cautionary lesson for any party acquiring a financially pressured UK trading business without thoroughly addressing outstanding debts as part of the transaction.

What Is a Winding Up Petition?

A winding up petition is a formal application to the court by a creditor seeking a compulsory liquidation order against an insolvent company under the Insolvency Act 1986. If the court grants the order, the company is placed into compulsory liquidation, an Official Receiver or licensed insolvency practitioner takes control, trading ceases immediately, and the company’s assets are realised and distributed to creditors in statutory order of priority. Critically, any dispositions of company property made after the date the petition was presented are void unless sanctioned by the court, meaning that a company continuing to make payments after receiving a petition does so at serious legal risk. This is why obtaining expert legal advice on the day of service is essential and not something that can safely be deferred.

What Happens After a Petition Is Served?

Once served, the petition is listed for a court hearing typically within weeks. Advertisement of the petition in the London Gazette, which ordinarily follows service, triggers immediate and severe practical consequences. Banks will freeze company accounts upon becoming aware of the petition. Suppliers may withdraw credit. Landlords may take steps under their leases. The reputational damage of a public petition can be impossible to reverse. Between service and the hearing, the company may pay the debt in full and seek withdrawal of the petition, dispute the debt and apply to restrain advertisement, negotiate a Time to Pay arrangement with HMRC, or take steps to enter administration, which imposes a statutory moratorium and provides a framework for rescue or orderly wind-down. None of these routes should be pursued without specialist legal advice, and the window for effective action narrows with every day that passes.

Directors Duties in the Shadow of Insolvency

When a company is insolvent or approaching insolvency, directors must have regard to the interests of creditors as a whole under section 172(3) of the Companies Act 2006. Directors who continue trading without a reasonable prospect of avoiding liquidation risk personal liability for wrongful trading under section 214 of the Insolvency Act 1986. Those who allow assets to be dissipated or payments made to connected parties may face claims under sections 238 and 239 of the same Act. The Official Receiver investigates director conduct thoroughly in every compulsory liquidation, and disqualification proceedings are a common consequence where misconduct is identified. Instructing specialist solicitors early allows directors to take the steps necessary to protect both the company and themselves, and this is why early legal intervention is so critical when the warning signs of insolvency first emerge.

Instruct Expert London Insolvency Lawyers

LEXLAW is a specialist litigation and insolvency law firm with extensive experience advising directors and companies facing winding up petitions from HMRC and other creditors. Our team of solicitors and practising barristers acts swiftly and decisively, whether the priority is disputing a petition, negotiating with HMRC, seeking the protection of an administration moratorium, or advising directors on their personal exposure. We understand the urgency of these situations and we are equipped to take immediate action from the moment you instruct us.

If your company has received a winding up petition, or if you are a director concerned that HMRC arrears or creditor pressure may be reaching a critical point, contact LEXLAW today for a confidential consultation. The earlier you act, the wider your options. Do not wait until the petition is advertised or the hearing date is imminent.