Summary
- You can’t chase old invoices any more. Legal action is frozen, and what you’re owed becomes a claim in the administration.
- You’ll probably get back little or nothing. Most suppliers are unsecured creditors and rank behind the costs, secured lenders and preferential creditors.
- You usually can’t stop supplying just because they’re insolvent, but you can agree with the administrator how new supplies get paid.
- Send a proof of debt early, with your invoices and evidence attached.
- If you supplied goods on retention of title terms, write to the administrator. You need their or the court’s permission to collect.
- Read the administrator’s proposals, which arrive within eight weeks.
- After six months, claim back the VAT through bad debt relief if you’re VAT registered.
- Check the rest of your ledger for customers who are paying more slowly.
Customers go insolvent relatively often
You’ve just found out a customer has gone into administration and they owe you money. Maybe it came in a letter from an insolvency practitioner, maybe you read it online. Either way, the invoices you were chasing last week are now part of an insolvency, and the rules for getting paid have changed.
You’re not the only one dealing with this. 182 companies in England and Wales went into administration in August 2026, up 44% on July and 60% on a year earlier, according to the Insolvency Service.
This guide covers what to do with a customer in administration, in the order it matters. Most of it applies if your customer is in liquidation too, and we’ve said where it’s different.
This is general information, not legal or tax advice. If a lot of money is at stake, or you want goods back, speak to an insolvency solicitor or your accountant.
What to do when a customer goes insolvent with unpaid invoices
| When | What to do |
|---|---|
| First 24 hours | Confirm it on Companies House, pause your reminders, list everything you’re owed, gather your evidence |
| First two weeks | Contact the insolvency practitioner, submit a proof of debt, make any retention of title claim |
| Within 8 weeks | Read the administrator’s proposals and vote if you’re invited |
| After 6 months | Claim back the VAT through bad debt relief |
| Now and ongoing | Check the rest of your ledger for customers heading the same way |
What a customer in administration means for your invoices
Administration is a rescue process. An insolvency practitioner, called the administrator, takes control of the company and tries to save it, sell it or get creditors a better result than closing it straight away.
Three things change for you the day it starts. You can’t take legal action to recover the debt, because the company is protected from legal action by the people it owes and nobody can apply to wind it up. Your unpaid invoices stop being invoices you chase and become a claim. And you’re probably near the back of the queue: unsecured creditors, which is what most suppliers are, rank behind the costs of the administration, secured lenders and preferential creditors.
Liquidation is different in one way that matters. The company is being closed, not rescued. The liquidator sells what’s left and pays creditors in order, and if there aren’t many assets, you won’t get your money back.
The first 24 hours
- Confirm it. Search the company on Companies House. An administration or liquidation shows in the filing history, along with the insolvency practitioner’s name and firm.
- Pause your reminders. Automatic reminders will keep going to an accounts inbox that can’t pay you. Stop them for this customer so your chasing history stays accurate.
- List everything you’re owed. Every unpaid invoice, every credit note, and anything delivered but not yet invoiced. Note the invoice date, due date, amount and VAT. Your aged receivables report is the fastest place to start.
- Gather your evidence. Signed terms, purchase orders, delivery notes, proof of delivery and your record of reminders sent. You’ll need them for your claim.
- Check your terms for a retention of title clause. If you supplied goods and your terms say you own them until you’re paid, you may be able to get them back or be paid what they sold for.
Should you keep supplying a customer in administration?
You may not get to choose. UK law now stops most suppliers ending a contract just because the customer has entered an insolvency procedure. You also can’t make new supplies conditional on the customer paying what it owed before, as Russell-Cooke explains.
What you can do is make sure anything you supply from now on gets paid. The administrator is running the business, so ask them in writing who will pay for new supplies and on what terms. Keep new invoices separate from the old debt in your accounts.
If carrying on would cause your business real hardship, a court can let you end the contract. That’s a legal step, so get advice before you stop supplying.
The first two weeks
Contact the insolvency practitioner. Their details are on Companies House or in the letter they sent. Tell them you’re a creditor, give the total you’re owed and ask to be added to the list of creditors. If the company is in compulsory liquidation, you contact the official receiver instead.
Submit a proof of debt. This is your formal claim. GOV.UK publishes a general proof of debt form, and the insolvency practitioner will tell you how they want it sent. Attach copies of the unpaid invoices and your evidence. Claims can have a deadline, so send yours early.
Make your retention of title claim, if you have one. While the administration’s protection is in place, you generally can’t collect goods without the administrator’s or the court’s permission. Write to the administrator, identify the goods, and send your terms, invoices and delivery notes. An administrator shouldn’t sell goods covered by a possible valid claim until it’s settled, and if they’ve already sold them, they should pass you the net proceeds, as British Dealer News sets out.
Look for money you can recover another way. A personal guarantee from a director, credit insurance, or a deposit you hold are each worth more than an unsecured claim.
Within eight weeks: the administrator’s proposals
The administrator has eight weeks to send creditors a statement of what they plan to do. That could be selling the business, a company voluntary arrangement, or moving to liquidation. Creditors are invited to approve or change the plan.
Read it closely. It usually estimates what unsecured creditors might get back, which is the number you need for your own cash flow forecast. Vote if you’re invited to, especially if the business is being sold and you’d like to supply the new owner.
Administration ends automatically after a year unless it’s extended, so expect updates over months, not weeks. Any payout can take longer. GOV.UK says dealing with assets can take years in some cases.
Six months on: claim back the VAT
If you’re VAT registered, you’ve already paid HMRC the VAT on invoices this customer never paid. You can usually claim it back through VAT bad debt relief. Most insolvency guides skip this and on a large invoice it’s real money.
HMRC’s conditions in VAT Notice 700/18 are:
- At least six months have passed since the later of the payment due date and the date of supply.
- You’ve already accounted for and paid the VAT.
- You’ve written the debt off in your VAT account and moved it to a separate bad debt account.
- The debt hasn’t been paid, sold or factored.
You claim it in box 4 of the VAT return for the period in which you meet the conditions, and you have four years and six months to do it. If you use the Cash Accounting Scheme, you never paid the VAT, so there’s nothing to claim.
If you’re paid anything on the debt later, you have to repay the VAT on that amount. Put the six-month date in your diary now, and ask your accountant how a payout from the administrator affects your claim.
Check the rest of your ledger
When one customer fails, the useful question is which of your other customers looks like they did six months ago. The warning signs are often in your own ledger before they’re anywhere else: payments that slip from 30 days to 45, then 60, part payments, promised dates that pass, and a different person in their accounts team every month.
Run your aged debtors report and look at each customer’s payment history, not just today’s balance. For anyone getting slower:
- Shorten their credit terms, or ask for payment up front on new orders.
- Set a credit limit, or lower the one they have.
- Start reminders before the due date, and make sure they reach someone who can pay.
- Follow the company on Companies House so you hear when it files something.
Here’s how to check whether a customer is a slow payer, and what Creditsafe adds if you want credit alerts.
This is the part credit control software is built for. Trove connects to Xero and shows how quickly each customer pays over time, so a customer who’s getting slower stands out while you can still do something about it. You can also give your riskier customers a firmer reminder schedule than everyone else.
You can start a free trial here or book a demo if you’d like to see it first.
Frequently asked questions
Can I still chase a customer in administration for payment?
Not for debts from before the administration. Legal action is frozen and old invoices are paid, if at all, through the insolvency. Make your claim with the administrator. Supplies made after the administrator took over are different, so ask them how those will be paid.
How much will I get back?
Often little or nothing, if you’re an unsecured creditor. It depends on what the assets sell for and who ranks ahead of you. The administrator’s proposals usually include an estimate.
What’s the difference between administration and liquidation for a supplier?
Administration tries to rescue the company or its business, so it may keep trading and still need you. Liquidation closes it. In both, your old invoices become a claim, paid only from what’s left after costs and higher-ranking creditors.
Can I take back goods I supplied?
Only if your terms have a valid retention of title clause and the goods can still be identified. While the administration’s protection is in place, you need the administrator’s or the court’s permission.
Do I have to write the invoice off to claim the VAT back?
Yes, in your VAT records. You write the debt off in your VAT account and move it to a separate bad debt account once six months have passed. Ask your accountant how to treat it in your main accounts.
