Did you know that even if a debt recovery invoice has been fully paid, you may still be entitled to claim compensation and additional interest?
If payment was received after the due date of an invoice then you could still claim between £40 to £100 in compensation per invoice. By issuing one of our Late Payment Demands we could recover money that you didn’t even know you were owed.
We recommend that you review your old invoices and see which ones were paid late. Your invoices may have been paid in full, but did you claim compensation for late payment?
Under the Late Payment of Commercial Debts (Interest) Act 1998, you are entitled to claim compensation and interest at 8% above the Bank of England's base rate on each of your late paid invoices. If you have a clause relating to late payment interest in your terms and conditions, you must charge any interest to be in line with that amount.
If you're concerned about the costs of claiming compensation, you need not worry, because if you issue a Late Payment Demand through Thomas Higgins then you can also recover the legal costs involved. This means that you can claim compensation and additional interest for free if your debt collection claim is successful.
Can I charge late payment interest and compensation once the debt has been paid?
You can claim interest and compensation on invoices that were not paid within the credit period but have been paid since then. Interest can be claimed on the period starting with the date the invoice should have been paid and ending with the date when it actually was paid.
It’s important to remember that you have up to six years to claim interest and compensation.
How do I work out what I’m owed on invoices?
The interest you can charge if another business is late with their payments is statutory interest. As mentioned above, this is 8% plus the Bank of England base rate for business to business transactions. You cannot claim statutory interest if there’s a different rate of interest in a contract of business.
For example, if your business is owed £1,000 and the Bank of England base rate was 0.5%:
The annual statutory interest on this would be £85 (1,000 x 0.085 = £85)
Divide £85 by 365 to get the daily interest: 23p a day (85 / 365 = 0.23)
After 50 days this would be £11.50 (50 x 0.23 = 11.50)
How much compensation am I entitled to?
If you have a clause relating to late payments in your terms and conditions, you must charge compensation that is in line with the amount in the contract. If you don’t have a clause relating to late payments, you are able to charge compensation as specified by the Late Payment of Commercial Debts (Interest) Act 1998.
The amount of compensation you can claim under the Act is:
- For invoices or debts up to £999.99, you can claim £40 per invoice
- For invoices or debts between £1,000 - £9,999.99, you can claim £70 per invoice
- For invoices or debts over £10,000.00, you can claim £100 per invoice
You can only charge the business or debtor once for each invoice payment.