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Are you a Business owed money by another Business?

Late Commercial Payments:

Are you a business owed money by another business? If so, you might be entitled to claim interest, compensation and recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. The purpose of the Act is to deter late payers and to compensate creditors. It cannot be applied, however, if your Terms of Business already include provision for interest in the event of late payment. Simply, you can claim under the Act if you have supplied goods/services to a business and the contract does not contain provision for interest on late/delayed payment.


This becomes payable 30 days from the date of supply of the goods/services or after receipt of the invoice, whichever is later. You can charge your business debtor interest at the rate of 8% plus the Bank of England base rate (currently 0.5%). You cannot charge this rate if your contract states a different rate. You can also claim interest on invoices not paid on time but which have since been paid. Interest can be claimed from the date the invoice should have been paid until the date it was actually paid.

Compensation and Reasonable Recovery Costs:

The Act allows you to charge a fixed sum for compensation for recovering a late commercial payment. The amount of compensation you can charge depends upon the amount of the debt. You can claim £40 for debts up to £999.99; you can claim £70 for debts up to £1000-£9999; and you can claim £100 for debts up to £10,000+. You can claim compensation whatever your collection costs are and if those costs are more than the prescribed compensation, you can claim this too. The amount of those costs is not prescribed but they must be reasonable.

You do not have to tell your customers that you will be claiming late payment interest, compensation or costs in the event of late payment. It is advisable however to include warnings to this effect on your invoices, statements and in your terms of business.

If you have any queries regarding this please contact the Debt Recovery team.

Before relying on this commentary please read the Reliance on information posted section in our Terms of Website Use in our Legal section. Please note that specialist advice should be taken in relation to any specific queries and the information above is provided for general information purposes only.

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