It is feared a Court of Appeal ruling on the HMRC's pursuit of back-payments for workers could push some in the care sector towards insolvency.

Judges are currently considering a challenge to a ruling last year that the minimum wage should be paid to care staff who sleep-in at their places of work in case they are needed overnight.

In May last year an employment appeal tribunal declared Mencap must pay the national minimum wage, as opposed to a fixed rate of £29.05, for sleep-in hours.

Mencap is now challenging the decision which has already had industry-wide ramifications.

"Only this month one of the UK's biggest providers of home care for old and vulnerable patients, Allied Healthcare, said it was approaching creditors for a rescue plan," said one care provider from the county, who did not want to be named.

"According to the Daily Telegraph it blamed, in part, an £11m bill for back-pay for sleep-in care workers and an additional £65,000 weekly operating cost from the National Living Wage."

Russell Davey, who runs Williams Morris College in Gloucestershire, which caters for young people with special needs, said for various reasons the college was only liable for two years back-pay - should the ruling by upheld. Most would be liable for six years.

"The impact for us is £80,000, which is a lot. We are going to have to uplift those fees from September. We have swallowed it for a year," he said, but warned others might not be so lucky.

"Care is already in crisis. We all have to pay HMRC, but is retrospective really a good precedent?"

Care England, which represents independent providers, warned a ruling in favour of workers being paid the minimum wage for sleep-ins could cost the sector £200 million a year from 2020 - and significantly £400 million in backdated pay.

In an open letter to the Guardian newspaper before the court case the Local Government Association said: "The LGA estimates that there is a £1.3bn pressure just to stabilise the adult social care market today. Adult social care is at a tipping point.

"Genuinely new funding is vital to help providers, personal budget holders and self-funders meet all funding pressures relating to sleep-in shifts."

The letter was also signed by the likes of the Association of Directors of Adult Social Services, the Homecare Association, Learning Disability Voices, Voluntary Organisations Disability Group ARC England and Care England.

Cllr Kathy Williams, cabinet member for adult social care delivery at Gloucestershire County Council, said: "We are aware of the case at the court of appeal, however it wouldn't be appropriate to speculate on the outcome.

"What I can say is that the county council has a good track record of adapting to changes in the marketplace, such as the introduction of the living wage and increase in demand."

Only last year the industry's regulator, the Care Quality Commission, also described the sector as being at a "tipping point".

"We fully support care workers being paid fairly for the work they do and we urge the Government to fund the cost of sleep-in payments with genuinely new money to prevent more care providers going out of business, contracts being handed back to councils, care workers losing their jobs and less investment in prevention," said open letter.

"Without this, it will put further strain on informal carers and harm those who rely on social care and make it harder to mitigate the pressures on the NHS.