The Late Payment of Commercial Debts (Interest) Act 1998 applies to contracts entered into after 1 November 1998 and gives businesses a statutory right to claim interest on a specified date if another business pays its bills late and there is no express contractual right to interest.

The Act will only apply if the following criteria is met:

1.       There must be a contract (either written or oral);

2.       The contract must be between businesses (it does not apply to consumer contracts);

3.       The contract must be for the provision of goods and/or services; and

4.       The consideration must be money.

In terms of the rate of interest payable under the Act, this is the applicable Official Dealing Rate (“the Dealing Rate”) at the time the debt fell due plus 8%. The Dealing Rate is a specific rate of interest set by the Bank of England and is reviewed twice each year; on 30 June and 31 December respectively. The current rate of interest under the Act is 13.25%.

Under the Act, not only can a business recover interest on an outstanding debt, but there is also an entitlement to claim compensation. The compensation is a fixed amount based on the amount of the unpaid debt:

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If there has been a failure to pay several invoices, then it is arguable that there is an entitlement to claim on each invoice.

The Act also provides the ability to pursue payment of the “reasonable costs of recovery” if these are not met by the fixed compensation outlined above.

At FMGS we understand how businesses of all sizes can suffer as a result of late or non-payment  and the knock-on effect this can have on its overall cashflow. We have a wealth of experience in recovering debts, both domestically and overseas, and are able to guide you through the process from taking your initial instructions and preparing a letter of demand to issuing proceedings and seeing the matter through to settlement or trial.  

We are always happy to have an initial discussion – please get in touch with Liam Horrigan or Wanida Costello to find out how FMGS can help you.

This article is not intended as a substitute for legal advice. The circumstances of each case differ and legal advice specific to the individual case should always be sought.