The term implied into contracts by The Late Payments Act
Did you know that if a customer is late paying your invoice, you may be entitled to interest on the outstanding amount even if you haven’t expressly said you would charge interest? Not many people know about the law* that implies a term into a contract (i.e. you do not need to expressly state this in your terms & conditions) which does just that and more. It applies in a B2B situation only and entitles you to:
- Interest at 8% over base rate of the Bank of England (currently 2.25% @10th Oct 22) on the amount outstanding from the date payment was due- so roughly 10%; plus
- A fixed sum between £40 and £100 depending on the amount of the debt; plus
- Reasonable costs of recovery of the debt
- On all contracts or terms & conditions for supply of goods & services (note there are some exceptions)
How to calculate the interest on the debt
There is a handy interest calculator here from the Small Business Commissioner.
Understand more about interest
If you want to understand more about what interest is and how it affects the economy, check out the Bank of England’s beginner’s guide
This is just a summary of the law and there are some nuances to check, so please contact us for further details.
* The Late Payment of Commercial Debts (Interest) Act 1998
