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Interest at 12 percent payable on late debts!

United Kingdom
11/07/2002
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Did you know that from 7 August 2002 you are entitled to interest at 8% above the base rate on overdue debts?

If you are a business or public sector supplier the Late Payment of Commercial Debts (Interest Act 1998) will allow you to claim this high rate if a debt remains outstanding for 30 days under any contract entered into from 7 August 2002. The parties (who must both be acting in the course of business) can chose to contract out of this obligation but only if the contractual remedy for late payment is “substantial.

Good news for suppliers; bad news for late payers!

Our tips

1. Suppliers can use this new high rate to apply pressure on their late-paying customers by threatening to enforce their statutory right, currently 12%.
2. Suppliers should consider amending their contractual terms to refer to “the statutory rate of interest applying to late payment.
3. Purchasers should be aware that “statutory interest means

8% + 4% (being the current base rate) = 12%.

4. Purchasers should consider, whenever they can, amending their standard terms and conditions to contract out of the statutory interest.

If you require any further advice please contact Tim Hardy at [email protected] or on +44(0)20 7367 2533 or Amanda Wadey at [email protected] or on +44(0)20 7367 2308.

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