Guide
Bank transfer to a company that went bust: will the bank refund it?
If you paid by bank transfer to a company that went bust, the bank will usually not refund it. The scam reimbursement rules cover fraud, not a genuine business that fails; your deposit becomes an unsecured claim in the insolvency, and unsecured creditors of small companies typically recover little or nothing. The exceptions are a credit card payment (Section 75), a debit card (chargeback) or a transfer that was a scam from the start.
Key facts
- Since 7 October 2024, UK banks must reimburse most authorised push payment (APP) scams up to £85,000 within five business days (Payment Systems Regulator reimbursement requirement). A payment to a real company that later fails is not an APP scam.
- A deposit paid by transfer is an unsecured debt in an insolvency. Secured lenders, the insolvency costs and preferential creditors (employees, and HMRC for VAT and PAYE) are paid first (Insolvency Act 1986, s.175, s.176ZA).
- Paying any part of a purchase between £100 and £30,000 by credit card makes the card issuer jointly liable for the whole contract (Consumer Credit Act 1974, s.75) — including the part paid by transfer.
- A debit card payment can be reversed by chargeback under the card scheme rules, usually within 120 days of the payment or the date goods were due.
- You can claim in the insolvency by sending a proof of debt to the liquidator or administrator; it costs nothing, and it is the only route for a transfer to a genuine company.
Why the bank says no
A bank transfer is an instruction, not a purchase: once your bank has sent the money to the account you named, its job is done. Unlike a card scheme, Faster Payments has no built-in dispute process, no chargeback and no liability for what the recipient does afterwards. If the company was real, took your money for a real job and then failed, nothing went wrong with the payment — the business failed. That is a commercial loss, and the bank did not cause it.
“But the company had no intention of delivering”
That is the line that matters. If the company was insolvent or the directors already knew they would not deliver when they took your deposit, it may count as a scam (see below) or as wrongful trading by the directors. If it was trading normally and ran out of money, it is a business failure. Banks assess this on the evidence: when the company stopped trading, what it told customers, whether it was still taking deposits after it had decided to close.
When it is a scam — and the bank must reimburse
Since 7 October 2024, UK banks and payment firms must reimburse authorised push payment scams up to £85,000 unless the customer acted with gross negligence. An APP scam is a payment you were deceived into making — to a fraudster posing as a business, to a cloned website, or to a “changed” bank account in a hijacked email thread. Three situations qualify; one does not.
| What happened | Scam? | Route |
|---|---|---|
| The website was a clone; the company it named never dealt with you | Yes | APP reimbursement claim with your bank; Action Fraud report |
| You paid the “new bank details” from an email — the money went to a fraudster | Yes | APP reimbursement claim; the firm’s email was likely hijacked |
| The company took deposits after it had decided to close, with no intention of delivering | Often | APP claim; also report to the liquidator and the Insolvency Service |
| A real company did real work, then failed with your deposit unspent | No | Proof of debt in the insolvency; Section 75 if any part was by credit card |
Report within 13 months of the payment. The bank has five business days to decide, longer if it needs to investigate. If it refuses and you disagree, the Financial Ombudsman Service is free.
Where you stand in the insolvency
A customer deposit is an unsecured debt, which is the last class paid before shareholders. The order is fixed by the Insolvency Act 1986:
- Creditors with a fixed charge (a bank lending against a specific asset)
- The costs of the insolvency itself
- Preferential creditors: employees’ wages and holiday pay, and HMRC for VAT, PAYE and CIS deductions
- A “prescribed part” set aside for unsecured creditors from floating-charge assets (capped)
- Floating-charge holders
- Unsecured creditors — you
- Shareholders
What a small trade company usually has left
Very little. Most small trade businesses hold a van, some tools, a few thousand pounds of stock and whatever is in the bank. Their filed accounts often show net assets in the hundreds — a fact you can see before you pay, and one a free company check shows in the balance-sheet line. The typical outcome for unsecured creditors of a micro-company liquidation is a few pence in the pound, or nothing, after a year or more.
How to make the claim anyway
Find the liquidator or administrator on the company’s Companies House page (“Insolvency” tab) or in the Gazette notice. Send a proof of debt: your contract or quote, proof of payment, and what was delivered. It costs nothing, it puts you on the list for any distribution, and it creates the paper trail you will need for any other route.
If you paid any part by card
Card payments carry the protections a transfer lacks, and they apply even when the company has ceased to exist.
Credit card: Section 75
For purchases between £100 and £30,000, the card issuer is jointly liable with the supplier for breach of contract. Crucially, the £100 is the price of the item or service, not the amount on the card: £100 of a £9,000 kitchen paid by credit card brings the whole £9,000 within Section 75, including the part paid by transfer. Claim in writing to the card issuer with the contract, invoices and evidence of what was and was not delivered.
Debit card: chargeback
Chargeback is a card-scheme rule, not a law: your bank asks the merchant’s bank to reverse the payment for goods or services not provided. It usually must be raised within 120 days of the payment or of the date delivery was due, and it covers only the amount paid on that card. It works after a company has failed because the claim goes to the merchant’s acquiring bank, not the merchant.
What to do now, in order
- Confirm the company’s status on Companies House: liquidation, administration or a strike-off notice, and the name of the insolvency practitioner.
- Decide which category you are in using the table above: scam, or business failure.
- Scam: tell your bank today that you are making an APP reimbursement claim; report to Action Fraud; keep every email and screenshot.
- Any card involved: claim Section 75 (credit) or chargeback (debit) in writing, now — the debit-card clock is short.
- Send a proof of debt to the liquidator, whatever else you do.
- Check the directors on Companies House. If the same people are already trading through a new company at the same address, tell the liquidator and the Insolvency Service — that is the phoenix pattern, and it is relevant to whether the deposit was taken in bad faith.
- If the bank refuses an APP claim you believe is valid, complain to the bank formally, then to the Financial Ombudsman Service.
A real example
Building services company still advertising with a strike-off notice pending
Companies House showed a compulsory strike-off notice in the Gazette and £16 of cash in the latest accounts; the website was live, quoting, and asking for deposits by transfer. Anyone who paid that week would have paid a company that was about to be dissolved — with no liquidator, no proof-of-debt process and no one to claim against. The notice was public, free, and visible in the first line of a free check.
Enter a website address, e.g. aurelia-kitchens.co.uk
How to pay next time
The money is protected by how you pay, not by how honest the firm looks.
- Put at least £100 on a credit card and the whole contract is covered by Section 75, up to £30,000. Ask for a card payment link — Stripe, SumUp and Square give any small firm one in minutes.
- Stage the payments against things you can see: materials on site, photos from the workshop, installation started. For bespoke trades 30–50% up front is normal; for building work 5–20%.
- Contract in the company’s name and number, not the brand’s.
- Check the register before each payment, not just the first. Companies change between the deposit and the final invoice.
- Never act on “new bank details” from an email. Phone the number on the original quote.
Frequently asked questions
Will my bank refund a bank transfer to a company that went bust?
Usually not. A transfer to a genuine company that later fails is a business failure, not fraud, and the APP scam reimbursement rules do not apply. Your deposit is an unsecured claim in the insolvency. If any part was paid by credit card, Section 75 covers the whole contract.
How much can I get back under the APP scam rules?
Up to £85,000 per claim, reimbursed within five business days, for authorised push payment scams reported within 13 months — unless the bank shows you acted with gross negligence. Some banks apply an excess of up to £100. The rules cover fraud, not commercial disputes.
Does Section 75 apply if I only paid the deposit by credit card?
Yes. Section 75 applies where the cash price of the item or service is between £100 and £30,000 and any part of it was paid by credit card. The rest of the price can have been paid by transfer.
How long do I have to claim a debit card chargeback?
Usually 120 days from the payment, or from the date the goods or service should have been delivered, depending on the card scheme. Contact your bank as soon as you know the company will not deliver.
What is a proof of debt?
A form you send to the liquidator or administrator stating how much the company owes you and why, with evidence. It registers you as a creditor so you receive any distribution. It is free and does not need a solicitor.
The directors have started a new company. Can I claim against it?
Not directly: the new company is a separate legal person. But tell the liquidator and the Insolvency Service. Directors who take deposits knowing the company cannot deliver can be personally liable for wrongful trading and can be disqualified.