Businesses have had the statutory right to claim interest on late payments from other businesses for some time now, but did you know you are also entitled to a fixed penalty charge from the debtor for late settlement of commercial debts?
Since 1998 the Late Payment of Commercial Debts (interest) Act has allowed small businesses the right to claim interest for late payment. The regulations were updated in 2002 to allow all businesses, including public sector organisations, the right to claim. Then, more recently in 2013, the Late Payment Regulations were amended again in the following ways:
- The creditor can force the debtor to pay interest plus the reasonable costs incurred in recovering the commercial debt if the debtor fails to pay on time.
- Businesses have 60 days to pay unless a longer period is agreed by the parties.
- Public authorities have 30 days to pay, which is non-negotiable.
- The creditor is entitled to compensation in the form of a fixed penalty charge from the debtor, plus additional reasonable costs incurred (such as legal fees). The fixed amounts depend on the sum owed, but are up to £100 on top of interest and additional costs.
How to claim interest on unpaid commercial debts
A claim for interest on an unpaid commercial debt should be made in writing to the purchaser. The letter should include:
- The amount owed, including total interest accrued to date
- The continuing daily interest rate (8% above the Bank of England base rate)
- The original invoice details
- Full name and address to whom payment should be made
- Method of payment
Businesses have up to six years to claim interest, costs and fixed penalty charges under the 2013 regulations, providing the contract concluded after 16 March 2013.
Do you need help claiming interest and fixed penalty charges from your debtors?
Brady Solicitors’ commercial debt recovery experts can assist you with all outstanding debts and non-payment of invoices. We will ensure you receive any fixed penalty charges owing as well as recover costs. We can also provide advice and representation should an invoice be disputed. Drop us an email or call 0115 985 3450.