How much can you claim?
Currently, a business may claim statutory interest for a recent debt at 8.00% over base rate along with compensation of £40 to £100 per invoice depending on the value of the invoice. The current base rate at the Bank of England is 0.5%.
Businesses can also claim interest on any invoices that were not paid within the agreed period, but have since been paid. For example, if an invoice was not paid on the agreed date of 1st January and takes two months before it is paid on the 1st March, interest can be claimed on the two months the invoice was overdue for payment.
Businesses can claim interest up to six years from when an invoice was supposed to be paid.
The following is a breakdown of how much compensation you can claim under the Late Payment of Commercial Debts (Interest) Act:
How does late payment compensation work?
When it comes to late payments of commercial debts, in addition to the interest that you are legally able to charge (8% over the current Bank of England interest rate for late payment interest), you can also pursue compensation for each unpaid invoice.
The amount of compensation will depend on the value of the invoice or multiple invoices involved, and there is no minimum invoice amount, so any late invoice can be subject to compensation. The three different late payment compensation levels are:
- £40 per invoice of values of or below £999.99
- £70 per invoice of values between £1,000 - £9,999.99
- £100 per invoice of values over £10,000
For expert advice or to discuss the next steps for recovering late payments for your business, get in touch with our specialist team today.
When can I claim late payment compensation and interest?
Businesses can claim late payment interest as well as the compensation involved if:
- It has supplied goods and/or services
- The contract was not a consumer credit agreement
- The buyer bought the products or services for business purposes
- The contract does not include a provision for interest on invoices that are overdue which amounts to a substantial remedy
Claiming reasonable costs
No matter what your collection costs are, businesses can claim late payment compensation. In addition, in cases where the reasonable costs of recovering the debt from an unpaid invoice are greater than the fixed compensation itself, you can claim increased compensation to cover the difference between the fixed compensation and the reasonable recovery costs.
Do I have to tell my customers that I will be claiming late payment interest?
No, you do not have to tell your customers that you will pursue a claim of late payment interest, the compensation or the costs involved before any breach of payment terms. However, it may be a good idea to state this in your terms of business to deter any late payments.
When am I not entitled to late payment interest or compensation?
If your contract or terms of business with customers already provides for the right to claim interest on overdue invoices is deemed to amount to a substantial remedy in itself you are not entitled to late payment interest, compensation or costs. For this reason it is advisable to change your terms of business to incorporate the relevant provisions of the Late Payment of Commercial Debts (Interest) Act - contact our specialist team for advice. This process requires an expert solicitor, as you will need to:
- Amend all documents where your terms and conditions appear
- Provide your customers with the amended versions and advise when the new terms and conditions will apply
What should I do next?
If you wish to discuss any aspect of the Late Payment of Commercial Debts (Interest) Act or the regulations and how they may affect your business or wish to pursue late payment interest or compensation for any invoices that you have not been paid contact our debt recovery solicitors for advice.
We have the expertise you need to pursue these claims and are experts in bringing about positive resolutions for those suffering from their invoices not being paid on time.
For more information, contact us today on 01616 966 229.