Late Payments

Article from the Ascot Lawyers Debt Recovery Team

large quotation markIn Britain there appears to be a prevailing culture of late payment, particularly in the grip of the current credit crunch. Late payment of debts is particularly troublesome for small businesses that rely upon regular cash flow.

Ascot Lawyers - Fleet ManagermentMany small and medium size businesses struggle at a time when their unpaid invoices prove to be their biggest asset, which if realised would mean that economically at least, the business would run smoothly.

In 1998 the Late Payment of Commercial Debts (Interest) Act came into force and was supplemented by the Late Payment of Commercial Debt Regulations 2002, but does not appear to be widely used. The Act was designed to help small or vulnerable businesses overcome the problems caused by late payment and to rectify what was seen as a growing problem. Recent research by Bacs estimated the total debt owed to small and medium size businesses as being in excess of £18.5 billion. Further research suggests that over 50% of trade debts remain overdue at any one time.

The Late Payment of Debts Act allows a business to claim, on a debt owed by another business or most public sector bodies, interest at the rate of 8% over the Bank of England Base Rate and, if the contract was entered into after 7 August 2002, compensation of between £40.00 - £100.00 on each debt.

The Act and Regulations can be used where:

  1. The contract for the order commenced on or after 7 August 2002.
  2. The business has supplied goods or services
  3. The "purchaser" of the goods or services was another business
  4. The contract does not already contain provisions for interest on overdue invoices or any other substantial remedy to be applied for non payment
  5. The contract is not a consumer credit agreement

If a business is unable to rely upon the Late Payment legislation, it may still be entitled to issue a claim against the debtor for non payment in any event.

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