How can the Late Payment of Commercial Debts Act help my business?

If you run a business, you will be having to respond on many different fronts to the challenges of the lockdown. But how do we respond to bad debt? The answer is be proactive, review your debtors, maintain your cash flow and, in doing so, give your business the best chance to survive these uncertain times.

A particularly useful tool is, to give it its full name, the Late Payment of Commercial Debts (Interest) Act 1998 (as amended). This piece of legislation, which we’ll call ‘the 1998 Act’ for shorthand, provides suppliers of goods and suppliers of services with a statutory right to claim interest on overdue debts and compensation for late payment. The 1998 Act implies certain terms into contracts covered by the 1998 Act, entitling creditors to interest from the due date for payment, until payment is made, with a set rate of interest of 8% above base rate (simple interest) and to compensation at fixed rates. The compensation is measured by the level of the debt. For debts of less than £1,000, £40 is recoverable; for debts of £1,000 or more but less than £10,000, £70 will be recoverable; and for debts of more than £10,000, £100 is recoverable. It is also possible for the creditor to recover reasonable debt recovery costs, if those debt recovery costs exceed the aforementioned amounts.

Business should be aware of and utilise this tool which provides a deterrent to late payers and compensation to your business. Please do contact Harrowells Litigation and Dispute Resolution Team and we will be happy to take your enquiry.