AnswersWhen a client goes under
A company that owes me money has gone into liquidation. What happens to my invoice?
The short answer
Usually little. Your invoice ranks in a fixed order2, after lenders, the costs, wages and HMRC's VAT and PAYE. In an Insolvency Service study of 2,717 creditors' voluntary liquidations from 2017, unsecured creditors, usually suppliers, got nothing in 90% of cases8. Your VAT is the exception: claim it back from HMRC9 six months after it fell due.
England and Wales only. WolfX is software, not a law firm.
The numbers
Where a supplier usually stands.
What you can add
A £6,000 invoice, £1,000 of it VAT
Say you invoiced a company £6,000: £5,000 for the work plus £1,000 VAT, which you have paid to HMRC. The invoice was due on 31 March 2026. In September the company went into liquidation, and nothing has been paid. Your claim on the liquidator is the whole £6,000, VAT included7, plus any interest and fixed sum to that day, left out here to keep the sum plain. Your claim on HMRC for the VAT is separate, and it has opened: six months have passed since 31 March.
The £1,000 comes from HMRC, so it does not depend on what the liquidation pays. The £5,000 does. In the Insolvency Service's study8, the fees of the process were more than the assets raised in most cases. Illustration only. Where unsecured creditors were paid, the middle return was 9p in the pound8: on £6,000 that is £540.00, and £90.00 of it is VAT that goes back to HMRC, so you keep £450.00. In about nine cases in ten there was no payment.
The road ahead
Seven steps. All free, and slow.
Step 1: Know where you stand in the queue
The liquidator pays in a fixed order. Lenders with a charge on one asset are paid from it. Then the costs of the liquidation, some wages and pension contributions, and HMRC's VAT and PAYE, if the liquidation began on or after 1 December 20201.
Then a slice for unsecured creditors, then the bank if it has a floating charge (a charge over changing assets, such as stock). Suppliers share the slice and anything the bank leaves.
Step 2: See what is set aside for suppliers
Where the bank has a floating charge, the slice3 is 50% of the first £10,000 of what would otherwise go to the bank, and 20% of the rest4, up to £800,000, or £600,000 for some charges made before 6 April 20205.
If what would go to the bank is under £10,000, the liquidator can skip the slice3 when sharing it would cost too much.
Step 3: Find the liquidator, and stop chasing the company
A liquidator takes over the company. In a compulsory liquidation, one a court has ordered, you need the court's consent6 to take action against it, so chasing it stops.
The liquidator's name is in the letter you were sent, in the notice in The Gazette11, and on the company's page at Companies House.
Write to the liquidator, not the director: company directors have no personal liability6 for its debts.
Step 4: Send your claim with the letter below
Claim what the company owed you on the day it went into liquidation, VAT included7. Add interest up to that day7, such as Late Payment Act interest, and the Act's fixed sum: the proof of debt page works both out. Interest stops on that day.
If you also owe the company money, the two are set against each other7 and you claim the balance. To be paid, you usually must prove the debt, with the details the Rules list7: send their form with the letter below or, if there is no form, use the letter on that page, which has them all.
Step 5: Sold goods? Ask for them back before they are sold
If your terms said the goods stay yours until you are paid, that claim stands against a liquidator for goods not yet sold or used10, as long as the terms were part of the deal. Terms printed only on your invoice usually do not count. Goods already sold on or used up usually cannot be reclaimed.
Name the goods in your letter, ask to collect them, and be ready to send your order, delivery note, invoice and terms10, with proof the terms reached the company before the contract was made.
Step 6: Claim the VAT back from HMRC
Six months after the later of the due date and the supply date9, write the debt off in your VAT accounts and put the VAT in box 4 of the return that covers that date. You must have paid that VAT to HMRC, and you have 4 years and 6 months9 from the same date to claim.
If the liquidator later pays you a dividend, repay HMRC the VAT part of it9 in box 1 of the return for the period you received it.
Step 7: Answer the liquidator's letters, and wait
Keep your address up to date with the liquidator and open every letter. After the first report you may hear nothing6 for a long time.
A notice of a dividend sets a last date to prove a debt. Miss it and you may lose your right to share in that dividend6.
The middle liquidation in the study took 712 days8. If a claim is rejected, the liquidator must say why in writing, and you have 21 days to apply to the court7; ask an insolvency solicitor.
A letter you can copy
Letter to the liquidator claiming your debt
Send it as soon as you know the company is in liquidation, with the proof of debt form if you have one.
Tap a highlighted gap to see what goes in it.
Email it to the liquidator named in the Gazette notice or on Companies House, so it is dated. Attach your statement of account and copies of the invoices, and keep a copy of everything you send. Sold goods on terms that kept them yours until paid? Add: 'My terms, which [Company name] accepted, say the goods on the statement stay my property until I am paid. Please do not sell or use them, and tell me when I can collect them.'
When not to bother
When it isn't worth it
- Paying someone to 'recover' it. Proving your debt takes a letter and copies, and you bear that cost yourself7. The law sets the order of payment2, so a fee cannot move you up it.
- Suing the company. The liquidator shares the money out, so a court claim puts you in the same queue with a court fee on top. Send the proof of debt instead.
- The director. The invoice is the company's, not the director's. The exception is a promise to pay it if the company does not, and that promise has to be in writing and signed12. Check your credit application for one.
- You use cash accounting. You paid no VAT on it, so there is nothing to claim9. On the Flat Rate Scheme, the VAT page has the sum.
- It is not an English or Welsh liquidation. An administration, a dissolved company and a Scottish or Northern Irish company follow other routes.
The Wolf's note
HMRC is ahead of you in the queue, and it is also where your VAT comes back from. That part does not depend on the liquidation. For the rest, send the claim, keep the copy, and plan your cash as if it may not arrive.
Mr. Wolf · the AI inside WolfX
What comes next
Your next move
How do I claim money from a company in liquidation?
Send the liquidator a proof of debt before their last date: a letter or form with the amount owed including VAT, how it arose and your invoices.
7 min read · Letter included
Who gets paid first when a company can't pay its debts?
Suppliers come near last.
6 min read
The director has started a new company. Can I chase that one?
Usually not: a new company is separate and does not owe the old one's debts.
8 min read · Letter included
Don't want to do this yourself?
The Wolf does every step for you. He works out the sums, writes the letters and keeps track of every date. Nothing goes without your yes.