Summary
You can still act when a customer enters administration: send the administrator a proof of debt for every unpaid invoice, claim the goods your retention of title clause covers, and agree new supply terms in writing. The VAT on the unpaid invoices comes back through bad debt relief, six months after the later of the due date and the supply date.
- Who to deal with: The administrator, not the customer: Schedule B1 paragraph 43 of the Insolvency Act 1986 stops legal action against the company without the administrator's consent or the court's permission.
- Supply: A contract term that ends or changes supply because of the administration has no effect (section 233B), and new supply cannot be made conditional on payment of the old debt.
- VAT: Bad debt relief under VAT Notice 700/18 opens six months after the later of the due date and the supply date, and the administration does not bring that date forward.
An email arrives from an insolvency firm you have never dealt with. Your customer is in administration, several of your invoices are open, and your reminder sequence sends the next one tomorrow morning. Here is the order of work: day one, two weeks, ten weeks, the six-month VAT date, and the ledger changes that make the next one cheaper.
The Insolvency Service counted 102 administrations in England and Wales in September 2026 (seasonally adjusted), after 182 in August and 128 in September 2025; more than 250 connected real estate companies entering administration between March and August lifted those months. Paidnice tracks the monthly figures on its UK company insolvency page.
- Check Companies House and The Gazette
- Freeze reminders, SMS and late fees
- Note the administrator's contact
- Send the proof of debt
- Retention of title claim in writing
- New supply only on written terms
- Proposals arrive within 8 weeks
- Creditors' decision by week 10
- Read the estimated outcome
- Bad debt relief in box 4
- Write-off posted in your accounts
- Within 4 years 6 months
What does administration mean for your unpaid invoices?
Administration puts a licensed insolvency practitioner in control of your customer's company, freezes legal action against it, and makes you an unsecured creditor for every invoice issued before the appointment.
The freeze is the moratorium in Schedule B1 paragraph 43 of the Insolvency Act 1986: no legal process against the company, no enforcement of security and no repossession of goods, unless the administrator consents or the court permits. The appointment ends after one year unless extended under paragraph 76.
Suppliers sit near the bottom of the order of payment in GOV.UK's creditor guidance.
| Paid first to last | Who |
|---|---|
| 1 | The costs of the administration, including the administrator's fees |
| 2 | Secured creditors with a fixed charge, from the charged assets |
| 3 | Preferential creditors: certain employee wages, and HMRC for VAT and deducted tax where the insolvency began on or after 1 December 2020 (Finance Act 2020, section 98) |
| 4 | The prescribed part for unsecured creditors (section 176A), then floating charge holders |
| 5 | Unsecured creditors, which is where a trade supplier sits |
What should a supplier do on day one?
On day one, confirm the appointment, stop every automated reminder and late fee aimed at the customer, and record the administrator's name and contact details against the account.
- Confirm it. Look for the appointment filing on Companies House and the notice in The Gazette. A phone call is not proof.
- Freeze the account. Pause reminders, SMS, statements, late fees and interest. Do not send a letter before action: paragraph 43 blocks the claim it threatens.
- Gather the file. Every open invoice, delivery note, order confirmation and the signed terms the customer accepted.
- Stay on the mailing list. The Insolvency Service forms include a Rule 1.38 election to opt out of creditor correspondence. Never return it while you are owed money.
The first thing we see go wrong is a reminder or a late fee landing on a company in administration the morning after the notice. In Paidnice, Freeze contact stops every policy on the customer in one step, so reminders, fees and statements stop together.
Can you refuse new orders from a company in administration?
Section 233B of the Insolvency Act 1986 switches off any contract term that ends or changes supply because the customer entered administration, so a supplier needs the administrator's consent or a court order to walk away from the contract.
This is general information for England and Wales, not legal advice.
Under section 233B, inserted by the Corporate Insolvency and Governance Act 2020, an insolvency termination clause stops having effect and an earlier termination right is frozen for the duration. The exits are the office-holder's consent, or court permission where continuing would cause you hardship. New supply cannot be made conditional on payment of the old charges (233B(7)).
The small-supplier exclusion in CIGA 2020 section 15 ended on 30 June 2021, and the current Schedule 4ZZA excludes only financial services contracts, so a small supplier is inside the rule.
The next order is still yours to price: you can ask the administrator for payment in advance or on delivery. Take legal advice before you refuse an order. To get paid for what you supply now:
- Ask the administrator, by email, who may place orders. An order from the old buyer with no sign-off from the administrator's team is the old company ordering.
- Address new invoices to the company "(in administration)", name the administrators on them, and raise them under a separate customer record so the two balances never mix.
- Keep the two apart in your claim too: debts incurred after the company entered administration are excluded from insolvency set-off under Rule 14.24(6).
Can you get your goods back under retention of title?
You can reclaim goods you supplied when your retention of title clause covers them, the clause was part of the contract, and the goods on site can be identified as yours, and the claim goes to the administrator in writing.
The Insolvency Service's technical guidance on retention of title sets three tests: the clause wording extends to the goods claimed, the clause was incorporated into the contract, and the goods can be conclusively identified as yours. It is written for official receivers, and an administrator will test the same points.
Evidence for each test: the signed terms or order acknowledgement that carried them, a delivery note that matches the invoice, and serial numbers or your own markings on the goods. A clause printed only on the invoice often fails the second test, because the contract was formed before the invoice arrived.
Why extended retention of title clauses fail covers the wording.
Ask to inspect the goods. The guidance says a claimant should not remove goods until the claim is accepted, and paragraph 43 bars repossession without consent or court permission. The written claim is the route.
How do you submit a proof of debt to the administrator?
You submit a proof of debt by completing the Rule 14.4 form, listing every unpaid invoice with VAT and any interest that had accrued, and sending it to the administrator with the documents that prove the debt.
GOV.UK publishes the Rule 14.4 proof of debt general form, and Rule 14.4 of the Insolvency (England and Wales) Rules 2016 says what it must contain. Send it even if the administrator has not written to you, since the creditor list comes from the company's own records.
What the proof must state (Rule 14.4):
- Your name and address, and your company details if you are a company.
- The total claim including VAT at the date the company entered administration, less payments received since, and whether it includes uncapitalised interest.
- How and when each part of the debt arose: every invoice number, date and amount.
- Any security you hold and its value, and any retention of title over the goods.
- The documents that substantiate the debt, which the office-holder can call for.
- The date, your signature, and the name and authority of the signer if it is not you.
If you also owe the company money, tell the administrator. Under Rule 14.24 set-off in administration happens only once the administrator gives notice of an intended distribution, with the account taken at that date.
Prove early. The Insolvency Service's guidance for creditors in compulsory liquidation and bankruptcy warns that a creditor who has not proved when a dividend is declared can lose the right to share in it.
What do the administrator's proposals tell you?
The administrator's proposals, due within eight weeks of the appointment, set out the plan for the company, the estimated outcome for unsecured creditors, and how creditors will decide on it.
Under paragraph 49 the administrator sends the proposals to every known creditor, other than one who opted out, within eight weeks of the day the company entered administration. Under paragraph 51 the decision date falls within ten weeks of that day, by deemed consent or a qualifying decision procedure. A physical creditors' meeting is not the default.
Read the estimated outcome for unsecured creditors first. If it says nothing is expected, you have your answer for the write-off; if a dividend is expected, plan for a long wait.
What happens to your debt in a pre-pack sale?
In a pre-pack, the buyer takes the business and chosen assets and leaves the old company's unsecured debts behind, so your claim stays against the old company and the buyer is a new customer.
Where the buyer is connected to the old company, the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 apply to a substantial disposal in the eight weeks from the day the company entered administration: the administrator needs creditor approval or an independent evaluator's report, and must notify creditors.
The new company owes you nothing unless the sale agreement says so. Treat it as a new account: a signed credit application, your current terms, and a low opening limit, or none while the same people run it and the old balance is unsettled.
Can you claim on a director's personal guarantee?
A director's personal guarantee is a claim against the director, not the company, and the moratorium in paragraph 43 lists no bar on action against a guarantor, so check the guarantee on day one.
Paragraph 43 names the steps that stop, and a claim against an individual who guaranteed the company's debts is not on the list. That is an inference from the wording, so have a solicitor check the guarantee before any demand goes out: the right signature, the invoices it covers, and any cap or expiry.
A guarantee only exists if you collected it on the credit application form when the account opened.
How do you record the bad debt in Xero?
Xero has no write-off button: you record a bad debt in Xero with a credit note against the invoice, coded to a bad debts account, and reverse it with a Receive Money transaction if a dividend arrives later.
Xero Central's article Write off a bad debt in Xero gives the UK steps:
- Open the unpaid invoice, click the menu icon and choose Create and apply credit.
- In Account, pick your bad debts account (or the original invoice account code). Check the date, tax rate and credited amount.
- Remove any tracked inventory item code first, or the stock quantity and value rise when the credit is approved.
- Click Approve. The invoice shows as paid, and the balance moves to the bad debts account.
On the accrual VAT scheme, Xero says to categorise the credit note to a specific bad debts account code. On the cash VAT scheme, Xero suggests the original invoice's account and tax rate, plus a manual journal at the No VAT rate. In Xero's words, both methods have a net zero effect on your reports and VAT Return.
On the Flat Rate Scheme, Xero says further steps are needed and points you to your accountant. If money comes in later, add a Receive Money transaction coded to the same account as the credit note, and reverse any manual journal for the amount recovered. The write-off in Xero is an accounts entry; the VAT claim has its own clock.
When does VAT bad debt relief start on the unpaid invoices?
VAT bad debt relief on an unpaid invoice starts six months after the later of the due date and the supply date, once the debt is written off in your accounts, and goes through box 4.
VAT Notice 700/18 sets the conditions: the VAT has been paid to HMRC, the debt is written off in your VAT accounts and moved to a bad debt account of its own, it has not been sold or factored, and it has stayed unpaid for six months after the later date. Claim within 4 years 6 months of that date.
The administration date does not move the clock. Two invoices to a customer that entered administration on 20 April 2026, each on 30-day terms, so the due date is the later date:
| Invoice | Supplied | Due (30 days) | Earliest VAT claim |
|---|---|---|---|
| A | 3 Feb 2026 | 5 Mar 2026 | 5 Sep 2026 |
| B | 8 Apr 2026 | 8 May 2026 | 8 Nov 2026 |
Invoice B went out twelve days before the administration and still waits until November. If the administrator later pays a dividend, repay the VAT element through box 1 for the period of receipt, using the notice's formula: VAT claimed, multiplied by the payment received, divided by the amount outstanding when you claimed.
VAT Notice 700/56 is written for insolvency practitioners and adds no other route for a supplier. Cash Accounting and retail scheme users already pay VAT only on money received. For corporation tax, a bad trade debt is deductible under BIM42700, and a later recovery is taxed when received.
Which of your other customers look like this one?
The customers most likely to leave the next invoice unpaid are the ones whose payment record with you has already slipped, so the ledger check after an administration starts with days to pay.
Paidnice cannot see which customers later fail. It can see the slip before it. In Paidnice data, after an on-time payment the next invoice is on time about 8 times in 10; after a payment just 1 to 7 days late, about 3 in 10. See warning signs of a late payer.
Customers who pay their first invoice on time pay about 73 in 100 of later invoices on time; if the first invoice is 1 to 14 days late, that falls to about 39 in 100. See warning signs of a late payer. Late payers are more likely to leave the next invoice unpaid, and a widening gap on one account is the signal to act on.
- Days to pay. Pull the accounts whose average has drifted out over the last quarter. Reading a customer's payment record shows what to look for.
- Exposure. Sort the aged receivables by balance across 31 to 90 days. A hold on the account with the oldest balance costs less than another delivery.
- Limits. Compare each balance with the limit set when the account opened. Setting a credit limit gives the method for resetting them.
In Paidnice, every customer carries a 0 to 100 credit score built from how they pay you, and a credit limit. A breach can raise an escalation of the type Escalate to stop credit to a named person, and customer groups can move an account to the late payers group on their own.
Supplier questions when a customer enters administration
Deal with the administrator, prove the debt early, supply only on written terms, and wait six months from the due date for the VAT: those four moves cover most of what a supplier can do.
Can a debt collector chase a company in administration?
No. Paragraph 43 stops legal process against the company without the administrator's consent or court permission, and a collection agency has no more rights than you do. Recall any account you placed.
Will I get anything back?
No official figure exists. GOV.UK says it depends on the assets left after the costs, secured and preferential creditors are paid, and with few or none there is nothing to share. The proposals give the administrator's estimate.
Can I include late payment interest in my claim?
Interest that had accrued by the administration date, under your contract or the Late Payment of Commercial Debts (Interest) Act 1998, belongs in the proof. Rule 14.4 asks you to say whether the claim includes outstanding interest.
About the editorial team
Denym started Paidnice in 2022 after customers paying late left his own business short on payroll. He has led it to $1 billion collected on time across more than 1 million invoices, and writes about credit control, late fees and getting paid on Xero and QuickBooks.
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