How Much Can I Charge For Late Payment Of Invoices In The UK?
For small businesses, late payments can have a serious impact on cash flow. With business to business transactions where no terms have been agreed or you do not have a contractual provision for late payment, the Late Payment of Commercial Debts (Interest) Act 1998 can step in to imply late payment terms into your contracts.
This means you may be entitled to charge interest on late payments, seek compensation on overdue invoices, together with reasonable legal costs. This helps businesses to recover losses caused by late payment and encourage prompt payments. Here’s what you need to know:
Statutory Late Payment Charges
Under the Late Payment of Commercial Debts (Interest) Act 1998 (“the Late Payment Act”), where applicable, businesses can charge the following:
Interest on Late Payments
Under the Late Payment Act you are entitled to seek:
- 8% per annum above the Bank of England base rate; and
- Interest can be applied daily from the date the invoice became due until the date payment is received.
Compensation
In addition to interest, you can also claim a fixed sum of compensation for each invoice, as follows:
- £40 for debts up to £999.99
- £70 for debts between £1,000 – £9,999.99
- £100 for debts of £10,000+
Recovery Of Reasonable Costs
You are also entitled to seek to recover an additional sum towards your reasonable costs if where the interest and compensation under the Late Payment Act do not cover all of your expenses in recovering the debt. Such expenses would include legal fees, debt collection agency charges or administrative costs.
How Lovetts Solicitors Can Help
At Lovetts Solicitors, we specialise in commercial debt recovery, helping small businesses:
- Sending Letters Before Action which can include interest and compensation under the Late Payment Act;
- Issuing legal proceedings to recover the debt, together with interest, compensation and reasonable costs if payment is not received; and
- Enforcing judgments obtained against debtors.
Late payments should never be accepted as the cost of doing business. If you are struggling with overdue invoices, take action today.