CLAIMING INTEREST AND COMPENSATION ON OVERDUE INVOICESNovember 22, 2013
If you are a business and your customers are regularly late in paying their invoices, you can claim interest and compensation under the Late Payments Legislation.
The rate of interest which has been set by the legislation is 8% above the base rate as at the date of the invoice. As the base rate has been 0.5% since March 2009, most invoices will be able to be charged at an interest rate of 8.5%.
Unless your terms and conditions state otherwise, the legislation states that an invoice is due and owing 30 days after the date of the invoice. If does not matter is the invoice is paid after the 30 days, interest and compensation are still recoverable, even if payment is one day late.
Compensation is set at fixed amounts depending on the value of the invoice and can be claimed on each and every invoice no matter what the value of that invoice is.
Invoice Amount: Compensation:
Less than £1,000.00 £40.00 per invoice
£1,000.00 – less than £10,000.00 £70.00 per invoice
£10,000.00 and above £100.00 per invoice
Invoices have a statutory limitation period of 6 years and therefore once 6 years have passed since the date of the invoice, you cannot claim interest, or compensation.
It is recommended that if you do not already have contractual interest stated on your terms and conditions that you either include the right to recover interest and compensation under the Late Payments Legislation, either on your terms and conditions, or on the invoice itself. If you already have contractual interest on your terms and conditions, then you will be obliged to use this rate instead.