The UK exchequer is chasing about £90m in unpaid taxes after a temporary staffing business was rescued from insolvency proceedings in an £18m deal that reimbursed private funders in full.

The main assets of Challenge Recruitment Group, which counted Tesco, Sainsbury’s and Co-op among its top customers, were acquired from administration in July by the US website swipejobs, in what appears to be the second time the British staffing business has emerged from insolvency while owing tens of millions of pounds to the exchequer.

The levels of debt owed by Challenge to HM Revenue and Customs has emerged as the chancellor, Rachel Reeves, is under pressure to announce tax rises in her autumn budget in order to shore up the public finances.

Swipejobs paid £4.9m as part of a “pre-pack” administration deal for the pick of Challenge’s contracts supplying staff to a series of huge UK brands, as well as £12.7m to the collapsed group’s secured lenders, Close Brothers and Praetura Asset Finance, according to a report by administrators FRP.

A pre-pack administration is a restructuring deal agreed in advance of a company entering insolvency – a staged process that frees the acquired business of debt and leaves administrators to use receipts to at least partly pay creditors.

Challenge’s remaining creditors, including HMRC, will probably be repaid a fraction of what they are owed.

When the deal to acquire Challenge assets from administration was announced on 12 July, a statement by the UK group made no mention of the company’s difficulties. It said: “We’re proud to announce that Challenge-trg Group has been acquired by swipejobs … Together, we are in an even better position to deliver exceptional results and enhanced operational efficiency; all underpinned by market-leading technology.”

Four Challenge businesses in administration owe HMRC about £34m, according to the administrator’s report.

A fifth company, TLR White Trading, owes a further £56m to HMRC relating to “five months of VAT and four months of PAYE” incurred by the wider Challenge business. TLR White Trading entered a separate insolvency process in April 2025, six months after being spun out of the Challenge Recruitment Group in October 2024. The new standalone company had the sole function of providing “temporary staffing and payroll services” to the wider Challenge group and was funded by the larger business in order to settle its “payroll costs”.

The latest Challenge insolvency comes after the same recruitment business, then called IF Trade Co, transferred its main contracts to Challenge-trg in 2022, before entering administration with debts to HMRC of about £34m, according to further documents filed with Companies House. Two brothers, Richard and Thomas Cropper, were directors of both IF Trade and Challenge-trg.

The siblings then sold a 75% stake in Challenge to an employee ownership trust for an undisclosed sum in October 2024, nine months before the group companies entered administration.

Swipejobs said it had acquired Challenge assets on a “go-forward basis” and that the brothers have been given a six-month consultancy contract. The Croppers did not respond to efforts to contact them.

HMRC estimates that “phoenixism” – the art of liquidating a company and allowing the directors to rise from the ashes in a new entity, free of debts – cost the exchequer about 22% of the £3.8bn of tax losses reported in 2022 to 2023.

An HMRC spokesperson said: “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.”