Do You Have Any Invoice Debt?
If your business has an outstanding and overdue invoice owing by another business, you are entitled to seek payment of the invoice along with interest and debt recovery costs. The relevant legislation: The Late Payment of Commercial Debts (Interest) Act 1998.
What is an overdue invoice?
Unless you have agreed payment terms, an invoice is overdue 30 days after
- the customer receives the invoice; or
- you delivered the goods and/or provided the service
What interest can be claimed?
For business-to-business transactions, you can claim statutory interest which is 8% plus the Bank of England Base Rate.
If you have a contractual entitlement to interest, then the contractual rate of interest will apply.
Late Payment Compensation
You can also charge the business a fixed sum for the costs of recovering an overdue invoice. This is known as Late Payment Compensation. Each invoice entitles you to one charge. The amount you can claim depends on the amount of the outstanding invoice.
Invoice Amount Compensation Charge
Up to £999.99 £40.00
£1,000.00 – £9,999.99 £70.00
£10,000.00 or more £100.00
Will it proceed to Court?
More often than not, a business is prompted to make payment upon receipt of a “Letter Before Action”. In the event an invoice remains outstanding, you are at liberty to issue Court proceedings to bring a money claim against the Company.
Will I recover legal costs?
We will always seek to add your legal costs to the company’s liabilities and recover wherever possible. The prospects of recovering legal costs are higher if you have a contractual entitlement to legal costs within your terms and conditions.
By virtue of the Late Payments Directive 2011, the Act was updated to include provision for a creditor claiming its reasonable costs’ if the costs are not covered by the compensation element. Following the directive, section 5A(2A) of the Late Payment Act provides as follows:
“If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.”
Will I get paid?
We understand that your aim is to get paid. Whilst we can make no guarantees that you will make a full recovery, we will never encourage you to throw good money after bad. We base our advice on the specifics of each case and always take into account commerciality before advising you.
Need our help?
Please email us at email@example.com or contact us on 0333 200 5212.
Gemma Hackett, Senior Associate Solicitor