Commercial Debt Recovery
No matter the size of your business, whether sole trader or multinational conglomerate, you are entitled to get paid for the work you have done or products you have supplied in a timely manner. There is even government legislation which enshrines this right into law - the Late Payments of Commercial Debts (Interest) Act.
The UK was one of the first countries in Europe to implement late payment legislation as far back as 1998. Businesses can use this legislation to ensure they are compensated when their invoices are paid late. However, it only applies to businesses supplying goods or services to other businesses, where there is no provision for late payment in the contract or terms and conditions of business.
If you have not agreed a payment date for the invoice then the law says the payment is late after 30 days after either the customer gets the invoice, or the goods/services are delivered (if later).
We can use the Late Payment of Commercial Debts Act to provide you with a service which can effectively be FREE to you, the creditor.
Charging Interest on Late Payment
The regulations allow you to charge statutory interest - 8% plus the reference rate in force at the time the invoice becomes late. The reference rate is fixed for two six-month periods each year and is derived from the Bank of England base rate on the day before each period begins.
| Base Rate on Date | Period |
|---|---|
| 31st December | 1st January - 30th June |
| 30th June | 1st July - 31st December |
The current rate of 9.25% is valid for invoices dated from 1st July 2022 to date.
Interest is calculated based on the number of days the invoice is late, and added to the debt daily.
Compensation
As well as charging interest, businesses are entitled to claim a fixed amount in compensation, depending on the size of the debt. This can be charged once per invoice and is added to the debt.
| Value of Unpaid Invoice | Compensation Amount |
|---|---|
| Up to £999.99 | £40 |
| £1,000.00 to £9,999.99 | £70 |
| £10,000 or more | £100 |
Reasonable Costs
Since 15/03/2013, businesses have been able to to claim reasonable costs if the compensation amount doesn't cover the costs of recovery. Reasonable costs could include legal fees and debt collection agency commissions. Below is a table of our commission rates. These amounts are calculated and, together with VAT (if applicable) at the prevailing rate, added to the balance of the debt.
| Value of Unpaid Invoice | Pre-Legal Commission | Legal Commission |
|---|---|---|
| Up to £999.99 | 20% | 25% |
| £1,000.00 to £9,999.99 | 15% | 20% |
| £10,000 or more | 10% | 15% |
Collecting the Debt
We will apply to the debtor for the value of the debt, plus late payment interest, plus the compensation amount, plus reasonable costs.
Please contact us for more information on our services for Commercial and Trade clients.
