| Late Payment of Commercial Bills |
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The Late Payment of Commercial Debts (Interest) Act 1998 has important business implications, but is surprisingly little known. Nowadays all businesses, irrespective of size, involved in a commercial contract with another business can claim statutory interest for the late payment of commercial debts.
This right may be claimed regardless of whether reference is made to the Act in the suppliers invoice or not; although good practice would suggest that details of any interest payable should be outlined in the invoice. If no credit period has been agreed then the Act sets a default period of thirty days the bill is delivered, after which interest can begin to accrue provided that the work for which the bill relates has been completed. The rate is a basic fixed rate of 8% - quite substantial when comparing it against today’s low interest rates, and you can claim this rate back for up to six years! In addition, your business can claim extra compensation for inconvenience based on the size of the unpaid debt as follows:- Less than £1,000 £40 £1,000 - £9,999 £70 £10,000 or above £100 So for example on a bill of £10,000 to a business that has been outstanding (as defined above) for six months the supplier can claim: £10,000 at 8% for six months £400 Statutory compensation as above £100 Total £500 Your business can claim this amount even though the bill may have been paid – provided that the amount has not been offered in final satisfaction – so on the above example, if the debtor paid the account three months after the thirty days had expired, your business could claim: £10,000 at 8% for three months £200 Statutory compensation £100 Total £300 The legislation is not used as often as parliament intended, perhaps because it is not generally known of, or perhaps businesses are afraid of antagonising business customers – but that said, part of maintaining a successful business is good cash flow. If you have a long standing debt you would like to enforce, please contact us to find out how we can help. Richard March |
