Passing LBA Costs to Business Debtors (B2B)
When a business fails to pay an invoice, creditors often ask whether the cost of preparing and serving a Letter Before Action (LBA) can be recovered from the debtor. The answer is yes, for business-to-business debts (B2B), even when the original invoice contained no information about late payment, interest, or recovery fees.
This is because B2B debts are automatically protected by the Late Payment of Commercial Debts (Interest) Act 1998. The Act inserts statutory rights for interest, compensation, and reasonable recovery costs(Section 5A) into every commercial transaction.
Instruct UK BailiffsKey Legal Protection for Creditors
- Automatically applies to B2B debts
- Statutory interest (8% + Bank of England base rate)
- Late payment compensation (£40–£100 per invoice)
- Reasonable recovery costs under Section 5A
No Payment Terms on the Invoice?
Many businesses issue invoices without referencing interest, late payment fees or recovery charges. In consumer (B2C) debts this creates limitations — but for B2B debts, the absence of terms does not prevent the creditor from recovering enforcement or LBA-related costs.
This is because the Act applies automatically, regardless of whether payment terms were written into the invoice.
Automatic Statutory Rights in B2B Debts
When a business debtor misses payment, the creditor gains the right to:
- Statutory interest (8% + BoE base rate)
- Late payment compensation (£40, £70 or £100 per invoice)
- Recovery of “reasonable costs” under Section 5A
These rights cannot be removed unless the contract provides a substantial remedy.
Section 5A – Recovery of “Reasonable Costs”
Under Section 5A of the Late Payment of Commercial Debts Act , a debtor must pay the difference between the fixed compensation and the creditor’s actual reasonable recovery costs. This includes fees incurred by instructing UK Bailiff Services Ltd.
Accordingly, the cost of producing and serving an LBA can be added to the outstanding debt.
UK Bailiffs’ LBA Costs (Approximate Recoverable Amounts)
The following are typical examples of reasonable recovery fees associated with LBA production and service. Both are generally recoverable under Section 5A in qualifying B2B cases.
Approximate Recoverable LBA Charges
- LBA Production Only – approx £95
Preparation, compliance checking, formatting and issue of a formal Letter Before Action. - LBA Production + Enforcement Agent Service – approx £395
Physical attendance by an enforcement agent, personal delivery of the LBA, timestamped evidence, and debtor checks.
For related services such as statutory document serving, please visit our Process Serving page.
Example: Adding LBA Costs to a Business Debt
A company owes £1,200 and ignores all reminders. The creditor instructs UK Bailiffs to prepare and serve an LBA. The amount recoverable becomes:
- Principal debt: £1,200
- Late payment compensation: £70
- Statutory interest (daily rate applied)
- LBA fee (approx £95 or £395)
The total payable may exceed £1,350 depending on service type and the number of days overdue.
Frequently Asked Questions
Can these costs be added to consumer debts?
No. Section 5A applies only to debts between businesses.
Are tracing or administration costs also recoverable?
Yes, provided they are reasonable, proportionate and directly related to recovering the outstanding debt.
Can these costs be claimed in court if proceedings are issued?
Yes. Section 5A recovery costs can be included within a money claim issued in the County Court.
What Happens if the Invoice Is Paid Without the Additional Fees?
Sometimes a debtor will pay the principal invoice amount either to the client directly or to UK Bailiff Services Ltd, but will omit the late payment compensation, statutory interest, or our recoverable LBA fees. When this happens, the rules differ depending on how the payment was made.
1. If the Debtor Pays the Client Directly
Where the debtor pays the main invoice amount straight to the creditor but does not pay the statutory extras, the client still retains the right to pursue:
- The late payment compensation (£40–£100)
- Accrued statutory interest
- All reasonable recovery costs, including UK Bailiffs’ LBA charges
These amounts remain legally due and can still be collected even after the principal invoice has been settled.
2. If the Debtor Pays UK Bailiff Services Ltd
If payment is made directly to us but the debtor only pays the principal invoice amount, we will notify the client immediately and confirm exactly what was paid.
Unless instructed otherwise, we will:
- forward the principal sum to the client, and
- continue to pursue the debtor for the balance of the statutory fees and recovery costs owed
The debtor remains liable for these costs under the Late Payment of Commercial Debts Act regardless of where the principal payment was sent.
3. If the Debtor Claims the LBA Fee Is “Optional”
Reasonable recovery costs — including our LBA preparation or service fee — are not optional. They are statutory obligations under Section 5A of the Late Payment of Commercial Debts Act. The debtor is required by law to cover these costs in full.
Reasonable Recovery Fees – Important Legal Limit
While Section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 allows creditors to recover “reasonable costs”, this does not provide unlimited freedom to add any charge. All recovery fees must remain proportionate, justified, and reasonable in relation to the debt.
Courts May Challenge Excessive Charges
If a recovery fee appears excessive, punitive, or unrelated to the actual cost of collecting the debt, a court may reduce or disallow that portion of the claim. Charges must reflect genuine, necessary recovery work and cannot be used as a penalty.
