Legislation was introduced as long ago as 1998 when The Late Payment of Commercial Debts (Interest) Act 1998 came into force. This initial legislation has since been strengthened and extended by the implementation of The Late Payment of Commercial Debts Regulations of 2002 and 2013

The legislation had two purposes. Firstly, to provide compensation to creditors for the late payment of debts. Secondly, to discourage late payment of invoices.

The legislation provides for interest to be a statutory right, claimed at 8% over the Bank of England base rate and also for three tiers of compensation. Compensation of £40.00 can be claimed for late-paid invoices  under £1000.00, £70.00 for late-paid invoices  under £10,000 and £100.00 for late-paid invoices  over £10,000. There is no minimum debt value for the compensation to apply.

Each invoice is viewed individually so compensation is calculated and claimed on each individual invoice.

The act provides that if payment terms were not agreed prior to trading, then the default period is set at 30 days.

Claims can be made up to six years after the invoice was paid and as this is a statutory right, no contract terms can block access to compensation.

The maximum for fair payment terms are also set.  It is stated that payment credit terms should not exceed 60 days unless both parties agree and that the extension beyond 60 days was justifiable and was not grossly unfair. Public bodies cannot buy on terms that exceed 30 days.

 

Links to relevant legislation

The Late Payment of Commercial Debts Regulations 2013

The Late Payment of Commercial Debts Regulations 2002

Late Payment of Commercial Debts (Interest) Act 1998

 

If you have received a claim for Late Payment Compensation from CPA (LPC) Recoveries and are wondering what this is about, click here to view our FAQ’s.