Chasing overdue invoices can be time consuming and an unwelcome distraction from the daily running of your business. Claiming interest on an overdue invoice can not only compensate you for the trouble, but can also act as a useful deterrent for potential offenders.
Firstly, we recommend checking your contract/terms of business. You may have an express clause that states interest will be charged and at which rate. If you have such a clause, interest should be charged in line with the relevant provision.
If you do not have an interest clause in your contract/terms, all is not lost! Where your invoice relates to the supply of goods or services (and is not a consumer credit agreement) you will be able to rely on the Late Payment of Commercial Debts (Interest) Act 1998. The terms are automatically implied into the contract and therefore prior notice is not required.
How much can I claim?
The Act allows you to claim interest at 8% per annum over the Bank of England Base Rate, currently 0.25%. Interest can be claimed from the end of the credit period (where applicable) to the date the invoice was paid.
In addition, statutory interest of up to £100.00 per invoice is also recoverable:
|For a debt less than £1,000||£40.00 per invoice|
|For a debt of £1,000 but less than £10,000||£70.00 per invoice|
|For a debt of more than £10,000||£100.00 per invoice|
Interest and compensation can be claimed up to 6 years later although we recommend addressing the issue as soon as it arises.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.