When to Charge Interest on Late Payments

Making sure you're not out of pocket

Business Debt Recovery Solicitors, Glasgow

If another business is late in paying for your goods or services you have provided, you could be entitled to charge interest on outstanding sums under statutory provisions, which set out the rules on when and what you can charge when you are recovering late payments. Here, we provide business owners with an overview of charging interest on late payments. To receive advice for your specific circumstances, get in touch with us today.

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What Constitutes a Late Payment?

The Late Payment of Commercial Debts (Interest) Act 1998 gives businesses who have supplied goods or services a statutory right to claim interest and reasonable debt recovery costs from their customers who have failed to pay their debts on time. Alternatively you may have a contractual right to require interest if the relevant contract makes provision for interest on late payments.
Most commercial contracts will specify how many days after invoicing payment will be due for the goods or services – usually 60 days. In the absence of agreed terms, the 1998 Act provides that payment should be made within 30 days from the date the goods or services were delivered or the date on which the purchaser has notice of the debt, whichever is later.

Charging Interest on Late Payments

You can begin charging interest on an overdue payment from the day after the last day that it was due to be paid. Using the example of a transaction with no agreed terms on payment, this would mean that on the 31st day after invoicing, you can begin charging interest on the outstanding sum.
Interest on late payment is charged at the statutory rate – this is 8% above the Bank of England's base rate for business transactions. You can check the Bank of England base rate here. Interest should be charged on the gross amount of the debt, inclusive of VAT.

Contact our Commercial Debt Recovery Lawyers Glasgow, Scotland

For comprehensive commercial debt recovery advice, call Morgan Legal today on 0141 258 4117 or fill in our online enquiry form.

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