Late Payment Legislation: Understanding Your Rights

The Late Payment of Commercial Debts (Interest) Act 1998 provides UK businesses with a statutory right to claim interest and compensation for late payment on overdue commercial invoices. This legislation aims to discourage late payment and ensure that businesses do not suffer financial disadvantages when invoices are settled late.

When the Act applies

The Act applies in situations where:

• The debt arises from a commercial contract for goods or services

• Both parties are acting in the course of business

• An agreed payment date has passed

• The debt remains unpaid

It is important to note that the Act does not apply to consumer or personal debts.

Statutory interest

Creditors are entitled to charge statutory interest, where applicable, at a rate of:

• 8% above the Bank of England base rate

This statutory interest accrues daily from the day after the agreed payment date until the full payment is received.

Fixed compensation for late payment

In addition to statutory interest, the Act allows creditors to claim fixed compensation for late payment, which includes:

• £40 for debts up to £999.99

• £70 for debts between £1,000 and £9,999.99

• £100 for debts of £10,000 or more

Compensation for late payment is payable per invoice, not per account.

Recovery costs

If the fixed compensation does not cover the reasonable costs of recovery, the Act permits businesses to claim additional reasonable recovery costs incurred due to late payment. This may include professional debt recovery fees, provided they are enforceable.

Our approach

At Trident Collections, we utilize the Late Payment of Commercial Debts Act when pursuing qualifying commercial debt recovery on behalf of our clients. Where appropriate, we may seek to recover:

• The principal debt

• Statutory interest

• Fixed statutory compensation

• Reasonable recovery costs

These amounts are pursued from the debtor in addition to the original invoice value.

Important notes

• Contractual terms may override these statutory provisions

• Recovery of interest and costs cannot be guaranteed

• Enforceability depends on the specific circumstances of each case

• Each matter is assessed individually before action is taken

All recovery activity is conducted professionally, proportionately, and lawfully.

Understand your rights on late payment

If you have overdue commercial invoices and want to understand whether statutory interest or compensation for late payment may apply, we offer a free, confidential assessment.