Late Payment Law
LATE PAYMENT LAW
Late payment law in England and Wales is governed by the following:
LATE PAYMENT OF COMMERCIAL DEBTS (INTEREST) ACT 1998
The Late Payment of Commercial Debts (Interest) Act 1998 allows a creditor to add interest to any debt claim at the rate of 8%, plus the relevant Bank of England reference rate. Interest claimed pursuant to this statute can be claimed from the due date of the invoice to the date of payment. You do not have to refer to this statute in your terms and conditions of business; the right to interest is implied by law. The only circumstances in which you might not be able to rely on this area of late payment law is if your terms and conditions of business provide for an alternative remedy for late payment.
LATE PAYMENT OF COMMERCIAL DEBTS REGULATIONS 2002, AS AMENDED BY THE LATE PAYMENT OF COMMERCIAL DEBTS REGULATIONS 2013
The Late Payment of Commercial Debts Regulations 2002, as amended by the Late Payment of Commercial Debts Regulations 2013, allow a creditor to charge statutory late payment compensation on top of any debt claim, provided that both creditor and debtor are acting in the course of a business and the debt relates to the provision of goods and/or services.
The compensation is designed to compensate a creditor for the effects of late payment and act as a deterrent to a commercial customer that habitually pays invoices beyond agreed payment terms.
The compensation is charged on a sliding scale, according to the value of the debt:
For debts between £0.01 and £999.99 – a creditor can claim £40.00 in statutory late payment compensation.
For debts between £1,000.00 and £9,999.99, a creditor can claim £70.00 in statutory late payment compensation.
For debts of £10,000.00 and more, a creditor can claim £100.00 in statutory late payment compensation.
Statutory late payment compensation can be claimed per invoice.
A very useful guide to late payment law can be found on the following website: http://payontime.co.uk/.