A User's Guide to late payment legislation - The Late Payment of Commercial Debts (Interest) Act 1998, as amended and supplemented by the Late Payment of Commercial Debts Regulations 2002

Receivng and Avoiding Claims for Interest

What do I do if I receive a claim for interest?

If the payment was made late then interest and compensation for late payment are due and payable under the late payment legislation (see What does the late payment legislation provide?) The supplier has a legal right to the interest and compensation for debt recovery costs, and if necessary, to seek enforcement through the courts for non-payment. To avoid litigation, if any interest and/or compensation for debt recovery costs are legally due and have been claimed, they should be paid.

If there is a genuine dispute, or the charge has been made incorrectly, then the claim should be queried at once.

How can I ensure that I don't receive a claim for interest and/or compensation for debt recovery costs?

• Purchasers must not enter 'into a contract that realistically they do not think they will be able to fulfil. (A purchaser's reputation and credit rating will be damaged, notwithstanding the increased risk of having to pay significantly more than originally envisaged as interest accrues and compensation is claimed.)
• Purchasers should ensure that agreed payment terms are complied with.
• Purchasers should reconcile invoices and statements of account promptly.
• Purchasers should raise any genuine complaints or disputes as soon as they arise, and at the very latest upon receipt of an invoice.
• If a dispute or complaint arises, purchasers should obtain (where possible) written confirmation from the supplier that a query exists.

As a supplier, how can I protect my right to claim interest and compensation for debt recovery costs?

• Suppliers should evaluate in advance the purchaser's financial status to minimise the risk of providing goods or services to a company that cannot or will not pay.
• Suppliers should send accurate invoices and statements of account promptly.
• Suppliers should ensure that genuine customer complaints or disputes are resolved as early as possible and should act reasonably at all times.
• Suppliers should have an effective collection system in place to ensure compliance with agreed terms.

Can purchasers and suppliers work together to promote a better payment culture?

Good communication between supplier and purchaser can help reduce the incidence of late payment. Purchasers and suppliers should ensure that payment terms are agreed at the start of the trading relationship and that they are clear to all parties.