Received an IRD Statutory Demand? Critical Steps Every Director Must Take in the First 10 Days

If Inland Revenue has served your company with a statutory demand, two things are true. This is serious. And it is more fixable than it feels right now, if you move quickly.

“What is an IRD statutory demand?”

A statutory demand is a formal notice under section 289 of the Companies Act 1993. Inland Revenue uses them to collect overdue GST, PAYE and income tax. It is not a court order and does not put your company into liquidation. What it does is start a clock.

“Is a statutory demand the same as a liquidation order?”

No. An IRD statutory demand is not a liquidation order and does not automatically shut your company down. It starts a process and creates a legal presumption that your company cannot pay its debts if you do not respond properly within the time limits.

“How long do I have to deal with a statutory demand?”

Two deadlines matter. Both run on working days, which exclude weekends, public holidays, and 25 December to 2 January.

10 working days to ask the High Court to set the demand aside, meaning cancel it. This is the one that catches directors out. It cannot be extended. Miss it and your right to challenge is gone.

15 working days to pay, secure the debt, or reach an arrangement Inland Revenue accepts. If none of that happens, the law presumes your company cannot pay its debts. That presumption is the point of the exercise: Inland Revenue no longer has to prove insolvency, so a liquidation application becomes very hard to resist. The application is advertised publicly, which is usually how your bank and suppliers find out. If a liquidator is appointed, you lose control of your company, and the liquidator will look back over how it was run and where the money went.

This is no longer rare. Nearly 70% of company liquidation applications now come from Inland Revenue, and its liquidation referrals to the courts rose 49% in the year to June 2025. A statutory demand is usually the last step before those proceedings.

Step one: get proper advice, immediately

You get one chance to apply to set a demand aside, and it must be filed, served and properly argued inside 10 working days. There is no do-over.

Tax debt also has a trap that catches generalists. An Inland Revenue assessment is generally treated as correct unless challenged through the formal disputes process in the tax legislation. Whether your debt can genuinely be disputed, and where, is a specialist question. Get it wrong and you burn your only window arguing in the wrong forum.

So these ten days are not the place to economise. Cheap or slow advice here is the most expensive kind: the fees you save are trivial next to a company in liquidation and, in some cases, personal exposure for its directors. Your accountant matters and should stay involved, but an accountant alone cannot run a set-aside application, and conversations with your lawyer are privileged.

Make the money count. Bring the demand, your myIR statements, the assessments behind the debt, and your recent accounts. A specialist can usually tell you at the first meeting which of the options below are open to you.

Step two: your options

Pay it. If the debt is right and you can pay, pay. Interest and penalties keep growing.

Negotiate. This is the main road, and it is well travelled. Inland Revenue can accept payment over time, in limited cases write tax off, and withdraw a demand outright. It entered roughly 200,000 instalment arrangements last year. It is also not an ordinary creditor free to act on commercial instinct: it is required to maximise recovery of the tax, and to collect over time the highest net revenue practicable within the law.

A realistic proposal that returns more than a liquidation would is therefore something Inland Revenue must weigh on its merits, not a favour it grants. Engage early, but ideally after taking advice, so your first conversation helps you rather than hurts you. And do it now: once liquidation proceedings are filed, Inland Revenue’s willingness to deal shrinks and other creditors can join the application. The room you have today is the most you will ever have.

Check the debt is right. This is where an IRD statutory demand differs most from an ordinary creditor’s, and where general insolvency advice most often misleads directors. If a supplier serves a demand and you say you dispute the invoice, that is a live argument for setting it aside. Against Inland Revenue it usually is not.

Once tax has been assessed, section 109 of the Tax Administration Act 1994 treats the assessment as correct and stops it being disputed in other proceedings, so the High Court will not reopen your tax bill in a set-aside application. A genuine dispute about the tax itself belongs in the disputes process in the Tax Administration Act, which runs to its own deadlines and may already have closed.

What is still worth checking is narrower, but real: whether the demand matches what was actually assessed and due, whether tax properly under challenge is not yet recoverable, and whether the account, penalties and interest are right even though the assessment stands. A demand will not be set aside for a technical error alone unless leaving it in place would cause substantial injustice. Which argument you have, if any, is a tax question, and you have 10 working days to answer it.

Face it honestly. If the company genuinely cannot pay now or ever, there are still better and worse paths. The better ones involve you choosing an orderly outcome rather than a liquidator choosing it for you. That, too, is a conversation to have early.

Traps that catch directors

Assuming it is already over. A statutory demand starts a process. It does not decide the outcome, and plenty of companies come out the other side of one still trading.
An out-of-date registered office. A demand is validly served at the address on the Companies Register. The clock runs even if you never saw it, so a demand that reaches you late may leave you days rather than weeks.
Waiting for a reminder. Inland Revenue will not send one. The next document may be a liquidation application.
Going quiet, out of fear or embarrassment. Silence reads as unwillingness to pay and closes the negotiation window. Lawyers who work in this area have seen far worse than yours.
Panic moves. Shuffling money or paying some creditors ahead of others before taking advice creates problems a liquidator will later pick apart.
Sometimes people ask: “What happens if I ignore a statutory demand?” If you do nothing, IRD can rely on the demand to say your company is insolvent and apply to the High Court to put it into liquidation. The liquidation application is advertised publicly, your bank and suppliers usually find out, and if a liquidator is appointed you lose control of the company and they investigate how it has been run.

Serious, but not the end of the road

A statutory demand is a serious legal document with unforgiving deadlines. It is not a liquidation order. In appropriate cases there is still room to negotiate with Inland Revenue, or to resolve the matter another way: in my own practice, I have acted for directors whose statutory demands were withdrawn following successful negotiations. It is often the point at which a tax problem finally gets solved, because it forces a decision. The directors who lose their companies are, almost without exception, the ones who waited.

“What should I do today if I have just opened a statutory demand from IRD?”

Find the date of service and diarise 10 and 15 working days from it.
Gather the demand, your myIR statements and assessments, and your latest accounts.
Check that your registered office address on the Companies Register is current.
Do not move money around or make panicked calls to Inland Revenue before you have advice.
Book a tax disputes lawyer today, not on day nine. Ask what to bring so the first meeting counts.

“Can a statutory demand be wrong or challenged?”

Yes, but not in the way most directors expect, and an IRD demand is not like an ordinary creditor’s. You generally cannot use a set-aside application to argue that your tax assessment is wrong: once tax is assessed, section 109 of the Tax Administration Act 1994 treats it as correct and prevents it being disputed in other proceedings. A genuine dispute about the tax itself has to go through the disputes process in the Tax Administration Act, on its own timetable.

What can still be challenged is whether the demand matches what was actually assessed and due, whether tax properly under challenge is not yet recoverable, and whether the account, penalties and interest are right. Technical errors alone are usually not enough unless they would cause serious injustice. Which of these applies to you is a tax question, and the 10 working days do not wait for the answer.