HMRC as a petitioner
HMRC is one of the most active creditor petitioners in the UK. In many years they have been the single biggest source of creditor-petition bankruptcies.
The threshold is £5,000. Below that, HMRC cannot petition but has other enforcement routes.
When HMRC pursues bankruptcy
HMRC typically petitions after Time to Pay has failed or not been agreed, and after enforcement agents (HMRC's Field Force) have not recovered the debt.
It is usually a last resort — HMRC prefers to collect through TTP because it gets the tax paid without the cost of insolvency proceedings.
The bankruptcy process for HMRC petitions
HMRC serves a statutory demand giving 21 days to pay. If unpaid, they petition the court for bankruptcy.
You can defend by paying, disputing the tax owed (rare — HMRC keeps clear records), or proposing an IVA. IVAs are often accepted by HMRC as an alternative to bankruptcy.
Avoiding HMRC petition
Engage early. Time to Pay agreements almost always work if you cannot pay a lump sum.
If you cannot afford any TTP HMRC accepts, propose an IVA before the petition. HMRC accepts a majority of IVA proposals that reasonably repay part of the debt.
Bankruptcy or DRO can also be voluntarily entered as a pre-emptive alternative to creditor petition.