The Late Payment of Commercial Debts (Interest) Act 1998, (the Act), is of the United Kingdom Parliament and enables businesses to charge their commercial customers interest and compensation on overdue invoices.
The effect of the Act is to imply certain terms into contracts which entitle creditors to interest automatically from the due date until payment is made. Interest on late payments is charged at the statutory rate of 8% above the base rate (at the date of writing this would amount to around 8.1%).
Most commercial invoices specify how many days after invoicing payment will be due and in the absence of such and any agreed terms, the Act provides that payments should be made within 30 days from the date the goods or services were delivered, or the date which the party has notice of the debt, whichever is later.
The level of compensation recoverable is dependant on the level of the debt;
- For debts less than £1,000, £40 is recoverable.
- For debts between £1,000 & 10,000, £70 is recoverable.
- For debts above £10,000, £100 is recoverable.
The Act only applies to debts which arise from the contract of the sale of goods and/or provision of services made between businesses. Other contractual agreements are excluded i.e. consumer credit agreements.
If you’re a business looking to pursue a debt, Jackson Boyd can assist you along the way.
Contact the Dispute Resolution department to discuss today.
