Late payment of commercial debts and right to charge interest

When does a payment become ‘late’?

If a business is late paying  for goods or services you  have provided, you can claim interest and compensation for the costs of debt recovery.

According to the law, payment becomes ‘late’ 30 days (for goods/services supplied to public authorities) or 60 days (for goods/services supplied to commercial transactions) after 1) the customer receives the invoice or 2) the goods or services are received, or the goods or services are verified and accepted (where provided for by statute or contract), whichever is the later.

How much interest can I charge on late commercial payments?

Where a business is late paying for goods or services you have supplied and your contract contains no agreed terms to the contrary, you can charge ‘statutory interest’ at 8% above the Bank of England base rate (currently 0.5%). Where the contract has a different rate of interest in it, that rate will apply.

If you decide to add interest to the money you are owed by the debtor, make sure you send a new invoice and that you expressly demand payment of this interest (and any debt recovery costs, as below).

Can I claim debt recovery costs on late payments?

If a business owes you money, you can also charge, on top of claiming interest, a fixed amount for the costs of recovering commercial debts. What you can charge depends on the amount of the debt.

AMOUNT OF DEBT

WHAT YOU CAN CHARGE

Up to £999.99 £40
£1,000 – £9,999.99 £70
£10,000+ £100

In addition to the fixed costs sums, you can also claim as compensation any “reasonable” costs of recovering the debt.

For more information, please see the Late Payment of Commercial Debts Regulations 2013. If you have any ongoing commercial debt recovery needs, please contact our Client Services Team on 0330 900 8000 and we will be more than happy to advise on the use of litigation and enforcement techniques.