The online business finance supermarket says the increase highlights just how far HMRC is prepared to go to recover unpaid tax, as part of moves to close the tax gap. According to Funding Options, in 2016 HMRC successfully obtained 2,065 winding-up orders, up from 1,944 in 2015.

The funder says that the rise also suggests that businesses continue to face cash flow challenges despite the UK’s reasonably robust economy, especially around major tax deadlines such as due dates for VAT or corporation tax bills.

SMEs are likely to be particularly affected as they can struggle to access to traditional loans and overdrafts which continue to be curtailed as regulators require banks to strengthen their balance sheets.

Conrad Ford, CEO of Funding Options said: ‘Shutting a company down is the biggest weapon in HMRC’s arsenal, but it’s one the taxman is using more and more.

‘In these extreme circumstances, companies may have some difficult choices to make between paying employees or suppliers and paying their tax bill.

‘It’s vital that businesses don’t stick their heads in the sand: SMEs need to try to work with HMRC to prevent arrears backing up. They should also take pro-active steps to make sure they have a funding safety net readily available for when they need it.’

Funding Options points out that although banks are reluctant to lend for the purpose of covering tax bills, other sources of funding may be available through specialist providers.

Ford said: ‘The good news is that identifying the right source of funding is becoming easier thanks to the government’s Bank Referral Scheme, which provides access to alternative finance for firms unable to obtain traditional loans.

‘As one of three platforms selected to field referrals under this scheme, at Funding Options we are seeing businesses becoming increasingly open to the potential benefits of options such as securing lending against the value of assets or unpaid invoices, P2P lending or crowdfunding.’