Did you know that all businesses and the public sector can charge statutory interest for the late payment of commercial debts?
Interest can be claimed at a rate of 8% above the base rate for the supply of goods and services, where the purchaser and the supplier are both acting in the course of business.
When calculating interest on a debt you should add 8% to the base rate at the time the invoice was raised. Interest and compensation can be claimed from the date the invoice becomes overdue and can be recovered without the need to issue Court proceedings.
Compensation can be claimed for the late payment pursuant to the table below:
Size of the unpaid debt
Compensation to be paid to the creditor
Up to £999.99
£1,000.00 - £9,999.99
£10,000.00 or more
Interest can be claimed at anytime during the statutory limitation period of six years however a claim for interest should be made promptly.
Use of the legislation is not designed to hinder your relationships with customers and it does not seek to encourage claims for interest and compensation. The aim is to deter companies from paying their bills late and should be used as part of standard business practices and credit management techniques.
In the same way that customers will be advised in the terms and conditions that payment is due within a specific time limit, they should also be advised that late payment interest, compensation and reasonable debt recovery costs will be charged on overdue invoices.
A company may have their own contractual terms for the late payment of invoices and if so these terms should be relied on instead.
To work out how much interest is due to you please use our simple interest calculator.