Interest and late payment charges can be claimed on an invoice in circumstances where a customer is late in paying for either goods or services.
By Richard Yates, commercial litigation solicitor, FarleysThe Late Payment of Commercial Debts (Interest) Act 1998 governs such scenarios and seeks to compensate innocent creditors for the late payment of debts whilst also seeking to deter debtors from defaulting on payments.
If there is no prior contractual stipulation as to when the payment is to be made, the law states that a payment is deemed late after 30 days in respect of public authorities and either when the customer receives the invoice or the customer receives the goods or services (if this is later) in respect of business transactions.Businesses can indeed agree to longer payment terms up to 60 days in duration providing that such terms are fair to both parties.
Interest can be charged on the late payment and is known as Statutory Interest. It is calculated at 8 per cent above the Bank of England’s base rate in respect of business to business transactions. Such Statutory Interest cannot however be claimed in circumstances where a contract governing the parties stipulates a different interest rate.There are also fixed sums that can be levied on businesses that are late in making payments. For debts of up to £999.99 it’s £40, or £70 on debts of between £1,000 and £9,999.99. Above £10,000, it rises to £100. Suppliers can also claim their ‘reasonable’ charges in respect of recovering such late payments under The Late Payment of Commercial Debts Regulations 2013. The regulations go some way to assisting businesses in the recovery of such debts where they may have to incur the expense of instructing a solicitor or debt collector, especially in circumstances where their own approaches are falling upon deaf ears.