by scowan
7. September 2010 00:59
A recent client query has prompted us provide a few blogs dealing solely with late payment legislation.
What is the Legislation?
The Late Payment of Commercial Debts (Interest) Act 1998 has been amended by European Directive 2000/35/EC. This amended legislation is in force as from 7th August 2002.
Basically the legislation, gives you as supplier, the statutory entitlement to charge interest at 8% over the Bank base lending rate as well as reasonable collection charges from a purchaser who is late in settling accounts.
The legislation was designed to reverse the bad practise of deliberate late payment, often ascribed to large companies and organisations using their power over small business although all businesses and the public sector will be able to use it.
How Will the Legislation Help You Recover Cash?
Basically the legislation provides suppliers with:
• The right to claim interest for late payment
• The right to claim reasonable recovery costs (unless you as the supplier have acted unreasonably).
The amount of compensation depends upon the amount you are due:
RECOVERABLE COSTS
Amount Due to You Amount to Paid By Creditor
Up to £999.99 £40
£1,000 to £9,999.99 £70
£10,000 + £100
• A right to challenge contractual terms which fail to provide a substantial remedy against late payment.
• A right for "representative bodies" to challenge grossly unfair contractual terms.
Your Terms and Conditions
Whilst the right to claim is automatic to encourage prompt payment from your purchases, to ensure you benefit from the legislation, you may wish to remind your purchasers of your entitlement to make the claim by adding the following to your terms and conditions:
“We hereby notify you of our rights in terms of the Late Payment of Commercial Debts (Interest)Act 1998 as amended to claim interest and compensation for debt recovery costs if we are not paid according to the credit terms agreed between us."
At Yuill + Kyle we automatically ask for ‘interest and collection costs’ when chasing business debts, helping to ensure we get the best possible outcome for clients.