Late Payment Legislation
In November 1998, the UK Government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. The UK was one of the first countries in the EU to introduce late payment legislation to help promote a culture of prompt payment.
Amended late payment legislation came into force in the UK on 7 August 2002, which fulfilled the UK’s obligations under the EC Directive on late payment and brought additional benefits to businesses.
For commercial contracts dated before 7 August 2002
All small businesses, with 50 or fewer employees, can use the rights given to them by the Late Payment of Commercial Debts (Interest) Act 1998 to claim interest retrospectively.
For commercial contracts dated from 7 August 2002
From 7 August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 was amended and supplemented to incorporate the features of European Directive 2000/35/EC on combating late payment in commercial transactions.
Under the revised legislation, all business owners and managers can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of Statutory Interest. Additionally, small and medium sized enterprises can ask a representative body to challenge grossly unfair contract terms used by their customers that do not provide a substantial remedy for late payment of commercial debts.
The compensation entitlement varies in accordance with the size of the debt
The revisions to the legislation also include the simplification of the calculation of statutory interest. A reference rate is now used to determine the late payment interest rate, which is fixed for a six-month period.
For further information and help with calculating interest and debt recovery costs, please visit our website by clicking the following link Credit Control Solutions
