Your Contractor Just Went Bust: What to Do Now

SiteKiln gives you plain-English information, not legal advice. If you need advice specific to your situation, talk to a qualified professional.

‍‌‌​​​​‌​​‌​​​‌‌​​​​​​‌​‌‌‌​‌​‌​​‍# Main Contractor or Employer Gone Bust, What to Do Now

When your main contractor goes bust, it's not just "their problem". Your cashflow, your materials and your lads' wages are suddenly on the line. This guide is about what actually happens to your money, and what you can do next.

1. First 24 hours: stop and protect yourself

The moment you hear "administration", "liquidation" or "insolvency practitioner", stop work unless you have clear written confirmation of who is paying you from this point on.

Don't throw good money after bad. No more materials on tick, no extra labour booked, no additional hours, no "just finish this area" favours.

Step 1: Stop work on that project until you know who is paying you and who is running the site. Don't agree to "just finish this bit" without something in writing from whoever is now in charge.

Step 2: Secure your stuff. Get your tools, plant and any easily movable materials you've paid for off site as soon as it's safe and lawful to do so. Take photos before you move anything -- your gear, your materials, the stage of the work, the site as you found it.

Step 3: Get information.

• Ask directly: "Has the company gone into administration or liquidation?"
• Get the company's full name and Companies House number (from old invoices or Companies House)
• Check the London Gazette or Companies House to confirm what's happened and who the administrator or liquidator is

Construction is one of the worst-hit sectors for insolvency. Nearly 4,000 construction companies went insolvent in the 12 months to July 2025 -- roughly 15-18% of all UK insolvencies. This isn't you being unlucky. It's the industry we work in.

From this point on, you're protecting your position -- not helping them limp along for free.

2. If you're employed (PAYE)

You are not last in the queue. The state steps in, up to a limit.

When an employer is formally insolvent, you can claim unpaid wages, holiday pay, statutory notice pay and redundancy pay from the government through the Redundancy Payments Service (RPS), paid from the National Insurance Fund.

Apply online at gov.uk/claim-redundancy. You'll need:

• Your employment start and end dates
• Wage details (payslips, contract)
• Any redundancy letter or notice
• The insolvency case reference (from the insolvency practitioner)

The RPS pays up to statutory caps -- currently a weekly pay cap of £700 (2025/26), a maximum of 12 weeks' arrears of pay, and up to 6 weeks' holiday pay. Redundancy pay follows the standard formula (0.5-1.5 weeks' pay per year of service depending on age, capped at 20 years).

This usually comes through faster than anything you'd see from a liquidator.

If you're unsure what you can claim -- wages vs holiday vs notice vs redundancy -- ACAS and Citizens Advice can walk you through it for free.

3. If you're a subcontractor

Harsh truth: you're an unsecured creditor.

In most construction insolvencies, unsecured creditors -- subcontractors, suppliers without security -- get pennies in the pound if anything. Often nothing at all.

You still need to register your claim with the insolvency practitioner. That's how you get on the creditor list and receive updates about the process.

Gather everything you have:

• Contracts and purchase orders
• Valuations and applications for payment
• Invoices (paid and unpaid)
• Emails confirming work, variations, instructions
• Delivery notes and signed timesheets
• Final account statements

Act fast but stay realistic. Chase what you're owed, but don't build your next year's plans around it coming in.

4. Where you sit in the queue -- creditor priority

In formal insolvency, there's a strict order of who gets paid first:

1. Fixed charge secured creditors -- usually banks with charges over property or big kit
2. Costs of the insolvency -- the administrator/liquidator's fees and expenses
3. Preferential creditors -- mainly certain employee claims (wages and holiday up to caps)
4. Secondary preferential (HMRC) -- since 2020, HMRC sits higher up for certain taxes, including CIS deductions
5. Floating charge secured creditors -- lenders with security over moveable assets
6. Unsecured creditors -- you, as a trade subcontractor, plus other suppliers, landlords etc.
7. Shareholders -- last in line

Trade subcontractors are almost always unsecured creditors. That means you get paid after secured, preferential and HMRC debts. Whatever is left (if anything) is shared pro rata between all unsecured creditors -- same pence in the pound for everyone.

Realistically, unsecured creditors often see 1-5p in the pound, sometimes nothing.

5. Administration vs liquidation vs CVA -- what it means for you

These three words all mean "the company is in trouble", but they're different beasts.

Administration: an insolvency practitioner is appointed to try to rescue the business or get a better return for creditors than an immediate shutdown. They take control of the company and its assets. There's a moratorium -- creditors (including you) can't just issue winding-up petitions or start most legal actions while administration is in place. There may be a sale of the business, a restructure, or a CVA. The company isn't dead yet -- but it might be. You should not expect quick payment of old invoices.

Liquidation (often a CVL -- Creditors' Voluntary Liquidation): this is terminal. The company's assets are sold to pay creditors in a set order of priority, and then the company is dissolved. There is no "coming back" from liquidation. Any unpaid invoices and retentions become claims in the liquidation. There is no rescue plan -- you're in the queue as an unsecured creditor.

CVA (Company Voluntary Arrangement): an agreed plan where the company offers to pay creditors a percentage of what they're owed over time. It only goes ahead if creditors vote it through. You may be asked to vote. You'll usually be offered pennies in the pound over a few years instead of nothing.

In all cases: ongoing contracts and work are in question. Don't carry on as normal on the promise of "it'll all be fine."

Watch for phoenix companies. If a new outfit with a similar name, the same directors, and the same site tries to pick up the job -- treat them as completely new. New contract, new payment terms, payment up front or on shorter terms. Do not assume they'll honour the old company's debts. They won't.

6. Retention money -- and why it's probably gone

Retention is the slice (often 3-5%) the main contractor holds back from what they owe you, to cover defects and snagging. It's usually just part of their general cashflow, not ring-fenced.

There is no general legal requirement in UK law for retention money to be held in a separate trust account -- so in most cases it just sits in the main contractor's general pot. There has been longstanding industry pressure for retention deposit schemes, and the Building Safety Act 2022 touched on retention reform, but no statutory retention trust scheme is currently in force. Retention reform campaigns like the Aldous Bill have been attempted but not made it into binding legislation.

When a company goes into administration or liquidation, your retention is just another unsecured claim. You add it to your creditor form alongside everything else.

Don't bank on seeing it again, especially if you're near the bottom of the supply chain.

For next time: push for lower retention percentages, earlier release dates, or project bank accounts where your money sits in a ring-fenced account that the main contractor can't touch.

7. CIS deductions: your money, not theirs

If they deducted CIS from your payments, that tax credit belongs to you -- not the bust company.

Under the Construction Industry Scheme, contractors must deduct CIS (usually 20% or 30%) from payments to subcontractors and pay it over to HMRC with a monthly return.

If they deducted CIS but never actually paid it to HMRC, you may still be able to claim the credit. HMRC can allow the deduction against your tax bill if you can prove it was taken. HMRC's internal guidance (CISR74040) confirms that where the contractor is insolvent, HMRC will try to get missing CIS returns from the insolvency practitioner -- and if that's not possible, they can still give you CIS credit based on your evidence.

You'll need:

• CIS payment and deduction statements
• Payslips or remittance advice showing the deduction
• Bank statements showing the net amount received
• Any correspondence confirming the gross-to-net breakdown

Talk to your accountant or call HMRC on 0300 200 3300 to get those credits recognised. Don't assume the money has vanished just because the contractor has.

This is one of the few areas where you might claw something back even when the company is finished.

8. Materials, tools and plant on site

Your gear and materials are your priority before anything gets locked up or claimed as company assets.

Tools and plant that are clearly yours (marked, serial numbers recorded, invoices in your name): go and collect them as soon as it's safe and you're allowed access. Do it calmly and with a paper trail -- email the IP beforehand to confirm you're collecting your own property.

Hired plant and equipment is generally the hire company's asset. If it's in your name, you stay responsible for it -- speak to the hire firm and get it off the dead site to somewhere safe.

Materials you've supplied but not been paid for: if your contract or terms and conditions include a retention of title clause ("goods remain our property until paid for in full"), you may be able to reclaim them before they're incorporated into the works. This is sometimes called a Romalpa clause.

The insolvency practitioner may try to treat everything on site as company assets. If there's serious money tied up in materials, get legal advice quickly.

Once materials are built in -- cast into concrete, fixed to the structure, installed -- retention of title is effectively dead. They've become part of the property and you can't rip them back out.

Don't get into a fight on site. If there's any dispute, back off and take legal advice rather than risking arrest or a civil claim.

9. Should you carry on working?

When the main contractor dies, the project doesn't automatically die with it. The client still has a half-finished job. They might ask you to keep going. Think carefully.

Who pays you? If you carry on under your old sub-contract with the insolvent main, you're doing work for someone who literally can't pay you. If the client wants you to continue, you need a new contract (or at least a clear written instruction) that says they will pay you directly -- on what rates, what terms, and for what scope.

Health and safety / CDM. Under CDM 2015, there must be a principal contractor responsible for site safety and coordination. If the named PC has vanished, someone else (often the client or a new main contractor) must be formally appointed. Until that's sorted, you can end up on a site where no one is clearly in charge of H&S, method statements or inductions.

Insurance. Check with your insurer: does your PL/EL cover still apply if the principal contractor named on the F10 or in your documents no longer exists? In practice your PL follows you, but you want your broker's written confirmation if the project structure has changed.

Safe rule: pause until you know who is principal contractor now, you have new written terms directly with the client or replacement main, and you're happy your insurance still lines up with the new setup.

10. How to register as a creditor

You don't need to be special. You just need to be organised.

The insolvency practitioner will try to write to all known creditors, but their lists are often incomplete. If you hear nothing within a few days:

• Look up the company on Companies House (find-and-update.company-information.service.gov.uk) to find the insolvency details
• Check the Gazette (thegazette.co.uk) for formal insolvency notices
• Contact the IP directly

Ask for a proof of debt or creditor claim form. Complete it with:

• Your details and the company's details
• Total amount owed (including retention, if applicable)
• Supporting documents attached (invoices, contracts, statements)

Keep a full copy of everything you send and note the date. This also matters for your own tax return -- you may be able to write off the bad debt.

You'll then receive circulars about creditor meetings, proposals, and any final dividend (if there is one). Expect it to be small and slow.

11. Pay when paid -- and why it's illegal

You'll sometimes see clauses in sub-contracts that say "we don't have to pay you until we've been paid by the client." These are pay when paid clauses.

Under the Housing Grants, Construction and Regeneration Act 1996 (the Construction Act), pay when paid clauses are generally illegal and unenforceable. A main contractor can't refuse to pay you just because they haven't been paid by the client.

Pay when certified is different -- it links payment to the issue of a certificate. Still allowed, but the certifier can't just drag their feet forever.

In an insolvency context: a banned pay-when-paid clause doesn't magically get you your money. It just means the old excuse doesn't work. You still sit where you sit in the creditor queue.

12. Adjudication against an insolvent company

Technically possible. Practically awkward.

You can still refer a payment dispute to adjudication under the Construction Act even if the other side is in administration or liquidation.

The problem is enforcement. Even if you win an adjudicator's decision, the court may refuse to enforce it against a company in insolvency proceedings because of the Insolvency Act 1986 rules about treating all creditors fairly (the pari passu principle).

The leading case is Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 -- the Supreme Court confirmed that adjudication is available in principle even during insolvency, but enforcement remains at the court's discretion.

Adjudication can get you a number on paper, which may help your proof of debt. It doesn't turn a broke company into a solvent one. For smaller debts, the cost and hassle may outweigh whatever pence in the pound you'd eventually see.

13. Apprentices: what happens to you

If your employer goes under mid-apprenticeship, you haven't wasted your time. Your progress and qualifications travel with you.

Contact your training provider first. They are usually the quickest route to finding you a new employer to continue with.

Contact CITB on 0344 994 4400 and tell them your employer has become insolvent. They can explain your options, help match you with another employer, and advise on any support packages available.

Your apprenticeship agreement, off-the-job training hours, and college progress all transfer to the new employer. The new employer picks up the remaining government funding.

Keep copies of:

• Your apprenticeship agreement
• College reports and assessment records
• Logbooks or online evidence of your training hours
• Any NVQ or qualification certificates to date

Your goal is to plug into a new firm as quickly as possible so you don't lose momentum. Most training providers will prioritise displaced apprentices.

14. Carillion -- the worst-case example

When Carillion collapsed in 2018, around 30,000 subcontractors were affected. Estimates suggest around £800m was owed to those firms. Many got nothing or tiny pence-in-the-pound dividends.

It shows what really happens when a big main goes down: the money you're owed can effectively vanish, even if your own business is solid. It's why checking who you work for, watching your exposure to one contractor, and staying on top of payment terms before a crisis matters more than chasing money after one.

What to do next

1. If you've just heard the news, follow sections 1-3 above -- stop work, find out your status, register as a creditor
2. Collect your tools and materials from site (section 8) before access gets restricted
3. If you're employed, start your RPS claim at gov.uk/claim-redundancy immediately
4. Talk to your accountant about CIS credits and bad debt write-offs
5. If you're an apprentice, call your training provider and CITB today
6. Read the adjudication guide if you're owed serious money and want to understand your options

An insolvency solicitor would typically charge £250-400/hour for this advice. This guide is free. If SiteKiln helped, buy us a brew.

Sources

• Insolvency Act 1986 -- legislation.gov.uk/ukpga/1986/45 -- creditor priority, administration, liquidation, pari passu principle
• Housing Grants, Construction and Regeneration Act 1996 -- legislation.gov.uk/ukpga/1996/53 -- pay when paid prohibition, adjudication rights
• Building Safety Act 2022 -- legislation.gov.uk/ukpga/2022/30 -- retention reform provisions (not yet in force as statutory scheme)
• Employment Rights Act 1996, Part XI -- legislation.gov.uk/ukpga/1996/18/part/XI -- redundancy payments
• Bresco Electrical Services Ltd v Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25 -- adjudication during insolvency
• HMRC CISR74040 -- CIS credit where contractor is insolvent
• Construction Industry Scheme -- gov.uk/what-is-the-construction-industry-scheme
• Insolvency Service statistics, Q2 2025 -- gov.uk/government/statistics/insolvency-statistics -- nearly 4,000 construction insolvencies in 12 months to July 2025
• Redundancy Payments Service -- gov.uk/claim-redundancy

This topic is sponsored by The Online Accountant.

www.theonlineaccountant.com/?utm_source=sitekiln&utm_medium=sponsor&utm_campaign=payment-section →

SiteKiln's editorial team writes every guide independently. Sponsors do not review, edit or sign off on content. See our editorial standards.

Spotted something wrong or out of date? Email us at hello@kilnguides.co.uk.

In crisis? Samaritans 116 123 · Mental health support