Therefore, this revised directive is meant to strengthen the current order to extend the protections already in place and enjoyed by UK businesses across the Union. Medium-sized businesses and small enterprises or SMEs are the most vulnerable. As a result of this, administrative and financial burdens are likely to impede trade and increase the costs of doing business.
#Statutory interest on unpaid invoices free#
Late payments are a significant obstacle to the free movement of goods and services, and they can substantially distort the competition. For all debts that are above £10,000, a fee of £100 is recoverable. For example, for any debt less than £1,000, a fee of £40 is applicable.įor debts that are more than £1,000, and less than £10,000, then a fee of £70 is recoverable. The compensation is recoverable according to the level of debt. The laws made in 2013 are not compulsory, and the supplier decides whether or not to use them.īut, any unpaid supplier of goods and services has the right to claim interest on any overdue debts and should be compensated under the 1998 Act. Most of these measures are geared towards reducing the culture of late payments and making payment on time a norm.
The private sector and large firms have been using this law since 1998, while the small firms have been able to use it since 2002.Īs mentioned earlier, there was a clear amendment in March of 2013 that allowed business owners to charge extra fees for collecting late invoices. Since 1998, there has been a late payment legislation that saw businesses having the statutory right to charge interest for all late payments. The UK was one of the first countries within the EU to implement the late payment act to help promote a prompt payment culture.
The additional compensation should be between £40 and £100 for each invoice. In this case, the interest to be claimed is charged at the rate of 8% above the base lending rate of the Bank of England. In brief, this law says that invoices that are paid late should attract interest charges.Īdditionally, for any invoice placed after 16th march of 2013 that is late, the business owner is allowed by law to claim any other reasonable costs related to collecting the debt.
Some firms, however, especially the large ones, will require or demand longer payment terms of between 60 and 120 days.Įverything concerning late payments is under the 1998 Act of the Late Payment of Commercial Debts, enforced in November of 1998. The law clearly states that payment MUST be received in the first 30 days of sending the invoice or delivery of goods or services, whichever one is later. The UK Late Payment Law says that all businesses have the right to charge their clients interest on late payment unless otherwise agreed.
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