Q: How much interest can be charged on late invoice payments?
Aug 07 2006
Answered by: Clive Lewis Ask a question
I assume from your question that you do not have a specific clause in your contract with the customer concerned. If your contract does contain a clause about interest chargeable in the event of late payment you should follow that. The law (the Late Payment of Commercial Debts (Interest) Act 1998) does give a statutory right to claim interest on late payment. The Act allows interest at eight per cent over the UK Bank of England base rate. The late payment rate is reset twice a year. The current relevant Bank of England rate is 4.5 per cent (the rate on 30 June) allowing debts incurred between 1 July 2006 and 31 December 2006 to accrue interest at 12.5 per cent (4.5 plus 8.0 per cent).
The Better Payment Practice Group website has a tool which does the calculation for you as well as fully explaining the method of calculation of interest chargeable and the amount of compensation you are legally entitled to add for the administrative inconvenience of having to chase a late payment.
The ICAEW cannot accept any responsibility for the answers to the smallbusiness.co.uk website. By their nature the questions do not give sufficiently precise and full information to give a personal response. The response is general guidance including where the enquirer might find further and fuller information of relevance to the current enquiry.
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