Late payment legislation


The late payment of commercial debts (interest) Act 1998

AgentFile® has a late payment feature that automatically works out the total late fee and adds it as required to any due invoice. The fee is enshrined in UK law


In 1998 the UK introduced legislation to help promote a culture of prompt payment. It gives businesses a statutory right to claim interest from other businesses for late payment of debt


In 2002 the legislation was amended to incorporate European Directive 2000/35/EC to combat late payment in commercial transactions


Under the legislation, all businesses can claim reasonable debt recovery costs (compensation) and may add statutory interest at a rate of 8% plus a reference rate set by the Bank of England

The reference rate is fixed for 6 month periods at the level of the Bank of England base rate on

1 January and 1 July


For example, the base rate on 1 July 2010 was 0.5%. For the next 6 months the interest that could have been charged was 8.5% (0.5% + 8%)


Interest can only be charged on the initial debt and is not subject to VAT


The compensation entitlement varies in accordance with the size of the debt:


£40 for a debt up to £999.99

£70 for a debt between £1000 and £9,999.99

£100 for a debt of £10,000 or more

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