firm news

Donna Goddard
Donna Goddard,
HEAD OF DEBT RECOVERY
more
Debt recovery tip 1 – Interest and late payment collection costs
17 January 2019

In our experience many companies don’t realise or fail to claim their entitlement to interest from their debtors on overdue invoices. Once an invoice becomes due for payment (in accordance with your credit terms, which in most cases are 30 days from the date of invoice) you are entitled to claim interest and late payment collection costs.

If you have terms and conditions in place, these may set out both the circumstances for charging interest along with the applicable rate. If not, you can rely on the Late Payment of Commercial Debts (Interest) Act 1998.  

Summary of interest which can be claimed

"Contractual"  

Contractual interest is at a rate which is specified in your terms and conditions.

“Late Payment”

Late payment interest is claimed under the Late Payment of Commercial Debts (Interest) Act 1998 and is calculated at the rate of 8% above the Bank of England base rate. All businesses can claim under Late Payment if they do not have a fixed contractual rate.

“Statutory” 

Statutory interest is calculated at the rate of 8% per annum. Statutory interest is set by the court and has been 8% since 1st April 1993.  

Example

If your business were owed £1,000, under the Late Payment of Commercial Debts (Interest) Act you are entitled to:

  • the annual statutory interest on this would be £85 (£1,000 x 0.085 = £85)
  • divide £85 by 365 days to get the daily interest: 23p a day 
  • if your invoice is 50 days overdue you are entitled to interest of £11.50  (50 x 23p = £11.50)

Late payment collection costs

You can also charge a business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it. The amount you are entitled to charge depends on the amount of debt. You can only charge the business once for each payment.

Amount of debt What you can claim
Up to £999.00 £40
£1,000 to £9,999.99 £70
Over £10,0000 £100

These amounts are set by the late payment legislation.

If you have any outstanding debt and/or are interested in our service, please contact our Debt Recovery team on +44 (0)118 952 7204 or by email [email protected]. Alternatively, contact our Head of Debt Recovery, Donna Goddard on +44 (0)118 952 7173 or [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

award winning law firm

Boyes Turner are proud to have received the following awards and recognition.

awards