Late Payment of Commercial Debts

The late payment of commercial debts (interest) Act 1998

In the United Kingdom, late payment legislation exists to protect businesses from delayed or non-payment by clients: the Late Payment of Commercial Debts (Interest) Act 1998

Late Payment Interest: businesses have the right to claim interest at a rate of 8% plus the Bank of England base rate on overdue payments. in addition to:

Statutory Costs: The legislation allows for statutory costs to be added to the invoice once it is overdue.

(a) for a debt less than £1000, the sum of £40;
(b) for a debt of £1000 or more, but less than £10,000, the sum of £70;
(c) for a debt of £10,000 or more, the sum of £100.

Statutory Payment Terms: Unless you have agreed on different terms with your client, the statutory payment terms are 30 days for business transactions and 60 days for public sector transactions.

Late Payment Calculator - UK Bailiffs

Late Payment Calculator

Use this calculator to determine late payment interest and statutory charges under the Late Payment of Commercial Debt Act. (based on current base rate of 5.25% + 8%)

Invoice Amount (£):

Days Late:

Late Payment Interest: £ 0.00

Statutory Charges: £ 0.00

Total Amount: £ 0.00

Background

The Late Payment of Commercial Debts (Interest) Act is a piece of legislation in the United Kingdom that is designed to encourage businesses to pay their invoices on time. It aims to address the problem of late payments, which can be detrimental to the cash flow of small and medium-sized businesses. Here's an explanation for beginners:

Late Payments : Late payments occur when a company does not pay its invoices within the agreed-upon payment terms. This can create financial difficulties for the supplier, as they may rely on receiving timely payments to cover their own expenses and maintain a healthy cash flow.

The Act : The Late Payment of Commercial Debts (Interest) Act was introduced to address this issue. It provides several key provisions:

Interest : The Act allows suppliers to charge interest on late payments from the day after the agreed payment date. This interest rate is typically set at the Bank of England base rate plus 8%.

Compensation: Suppliers are also entitled to claim compensation for the cost of recovering the debt, such as sending reminders and using debt recovery services.

Protection for Suppliers: The Act is intended to protect suppliers, especially smaller businesses, from the negative impacts of late payments. It encourages prompt payment by imposing financial penalties on late-paying customers.

Legal Framework: To benefit from the Act, the supplier should have a clear contract or agreement in place that specifies the payment terms. The Act does not apply to consumer transactions; it's primarily designed for business-to-business transactions.

Dispute Resolution: In the event of a dispute regarding the invoice or payment, the Act provides a framework for resolving such issues while still protecting the supplier's right to interest and compensation.

Significance: The Act is important because it helps maintain a fair and predictable business environment. It encourages businesses to honour their payment obligations promptly, which, in turn, supports the financial stability of their suppliers.

In summary, the Late Payment of Commercial Debts (Interest) Act is a UK law that helps businesses receive timely payments for the goods and services they provide. It does so by allowing suppliers to charge interest and claim compensation on late payments, thereby discouraging late payment practices and helping to protect the financial well-being of businesses that rely on prompt payments.