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When it comes to late payments of money that your business is owed by another company or organisation, this area of law is covered by the Late Payment of Commercial Debts (Interest) Act 1998. The legislation is designed to deter late payments of commercial debts in the first place, but also ensures that if repayments are late, the business that is owed the money can be appropriately compensated.
The Late Payment of Commercial Debts (Interest) Act 1998 applies only to commercial debt, but this includes sole traders, freelancers and other self-employed individuals as well as limited companies. This legislation does not cover personal transactions or borrowing.
If your business is trying to recover interest on late payments that are owed to you, or you want to know more about the commercial debt recovery process, please contact our expert team on 0161 696 6170 to find out how we can help.
In accordance with the Late Payment of Commercial Debts (Interest) Act 1998, where contract terms are silent or no terms have been agreed as to late payment, statutory late payment charges can be implied into payment terms. Such charges can be interest on late payments, compensation on overdue invoices as well as reasonable legal fees.
Yes, the Late Payment of Commercial Debts (Interest) Act 1998 applies to business-to-business contracts. Statutory interest is calculated at 8% plus the Bank of England base rate, accruing daily from the date the invoice payment was due until the date the payment is made.
The interest period for late payments in the UK begins the day after the agreed payment date detailed on the invoice or, if no payment terms were agreed, after the standard payment period set by law has elapsed—usually 30 days from the supply of goods or services or receipt of invoice.
If a customer refuses or fails to pay statutory late payment charges and interest, businesses may legally pursue payment through formal debt recovery processes. Typically, this involves issuing a Letter Before Action (LBA), followed by court proceedings if payment is still not made. Prompt legal action can increase the chances of successfully recovering outstanding debts.
No, statutory late payment charges do not need to be explicitly mentioned on the original invoice for businesses to legally claim them later. However, clearly stating the payment terms and the potential consequences of late payment on invoices, reminders, and contracts can help reduce disputes and encourage timely compliance from debtors.
In England and Wales, businesses typically have up to six years from the date a payment became overdue to pursue and claim statutory late payment interest and related charges. After this period, claims may become legally unenforceable under the Limitation Act 1980.
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