Late Payment Compensation

If you have been paid late on an invoice rendered commercially, then your business could be entitled to compensation from the debtor under the Late Payment of Commercial Debts (Interest) Act 1998. If an invoice is not paid on time, then a creditor is entitled to claim compensation from a debtor- even if there was no provision for interest or late payment in the invoice.

What is the Payment of Commercial Debts (Interest) Act 1998?

The Act enables creditors who have rendered an invoice that is not paid on time to claim interest, compensation & reasonable costs of collecting the debt (if the invoice is rendered after March 2013).

A creditor is entitled to claim interest at 8% over the Bank of England base rate (currently set at 0.75%). A creditor is also entitled to compensation at the rate of £40 to £100 per invoice that has been rendered.

Who can claim late payment compensation?

The Late Payment of Commercial Debts (Interest) Act 1998 applies to the commercial supply of goods and services to businesses. Therefore, the statutory protections only apply to businesses invoicing another business and not invoicing a consumer.

If a consumer has not paid you on time, then the only remedy you have for late payment compensation/interest is contractual i.e. this would have had to be a term of the contract.

Do I have a claim for late payment interest, compensation and debt recovery costs?

  1. A creditor has supplied goods or services;
  2. A debtor has bought by way of business;
  3. The contract is not a consumer credit agreement; and
  4. The contract does not have a provision for interest.

How much late payment interest can be claimed?

If the contract under which the invoice was rendered has a clause related to late payment interest, then a creditor must charge interest at this amount.

If the contract does not contain a late payment of interest clause then a creditor is entitled to charge interest at 8% over the Bank of England’s base rate.

A creditor has 6 years to claim interest.

How much late payment compensation can be claimed?

Late payment compensation under the Late Payment of Commercial Debts (Interest) Act 1998 is as follows:

Amount of the unpaid debtLate payment compensation
Up to £999.99£40
£1,000 to £9,999.99£70
£10,000 or more£100

Can late payment interest and compensation be claimed after the debt has been paid?

Yes, interest and compensation can still be claimed once the debt has been paid if payment was received late and provided that the date of payment is less than 6 years ago.

Instruct Specialist Debt Recovery Lawyers

We are specialist Late Payment Act solicitors and have helped businesses recover all the debt that is due to it. We can review terms of payment and re-draft them for your business to ensure that your business is protected in circumstances where a debtor does not pay you what is due. We can claim interest and compensation from debtors on your behalf; send late payment demands; letters before claim and issue Court proceedings (claiming the debt, interest, compensation and reasonable costs of debt recovery); and enforce Court judgments.

We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice.  We are experts in dealing with matters surrounding insolvency in particular issues.  Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.

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