The Late Payment of Commercial Debts (Interest) Act 1986 may entitle you to recover interest and collection costs on your debt. The legislation is designed for business to business debts (as opposed to business to consumer) and can also be used where money is owed by organisations in the public sector to your business. Using the legislation is your statutory right. You don’t even have to say that you’ll be using the legislation, because we will always add the interest and costs to the debt when we send our letter before action, or if legal action be necessary.
So what are you entitled to?
You will be entitled to claim interest at the statutory rate (currently 8%) from the “relevant date” that the debt is due. This date will generally be the day after the date payment has been agreed to be made. Interest will run from the agreed date for payment or, if there is no agreement, 30 days from the date of the performance of the obligation to which the debt relates.
You will also be entitled to claim reasonable debt recovery costs as follows:
- £40 if the debt is less than £1,000
- £70 if the debt is between £1,000 and £10,000
- £100 if the debt is more than £10,000
In addition, you will be entitled to claim the reasonable sum in recovering the debt less the fixed sum. This could include the costs incurred by you of instructing Yuill+Kyle to recover the debt.
What else do I need to know?
Using the legislation is your right – enshrined by law. It’s implied into your business to business contracts. Many creditors are unaware of their entitlement to recover interest and costs and are delighted when we send this cash to them – often greater than the principal amount of the debt which could cover our fees! (Please note that your right to use the legislation will be excluded if your contract provides itself for a “substantial remedy” sufficient to compensate you for late payment).