If a business customer has paid you late, you have a statutory right to interest and a fixed compensation payment - whether or not your contract mentions it. Work out exactly what you are owed.
The unpaid debt excluding any interest. Use the VAT-inclusive figure if VAT was charged.
Interest starts the day after this date.
You can claim on top of the invoice.
Paste this into your chase email. It states the legal basis, which is usually the part that gets the invoice paid.
Statutory interest is a right, not a cash flow plan. Invoice finance releases up to 90% of an invoice within 24 hours of raising it, so you stop funding your customers' payment terms out of your own bank account.
Compare invoice finance lendersThe Late Payment of Commercial Debts (Interest) Act 1998 gives a supplier the right to charge interest on a late business-to-business payment. The rate is 8 percentage points above the Bank of England base rate. It applies automatically - you do not need a clause in your contract, and the customer does not need to agree to it.
The rate that applies is not today's rate. It is fixed by the base rate in force on the reference date before your debt became overdue: 31 December for debts falling overdue between 1 January and 30 June, and 30 June for debts falling overdue between 1 July and 31 December. That rate then stays fixed for the life of that debt, even if the base rate moves afterwards. Most online calculators get this wrong and simply apply the current rate. This one applies the reference rate for your date.
On top of interest you can claim a one-off fixed sum for each overdue invoice, set by the size of the debt.
| Debt | Compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 and over | £100 |
If your reasonable costs of recovering the debt exceed that fixed sum - a solicitor's letter, for instance, or a debt recovery agency's fee - you can claim the difference as well.
The statutory rate applying to debts that became overdue in each half-year.
| Debt became overdue | Base rate | Statutory rate |
|---|
Statutory interest does not apply to consumer debts - both sides must be acting in the course of business. It also does not apply where your contract already sets a different rate of interest, provided that rate is a substantial remedy. A token rate written into a contract to dodge the Act can be struck out, and the statutory rate applied instead.
