INTEREST ON OVERDUE BILLS
If you are running a business one of your priorities is to be paid on time. Many companies are very slow payers indeed. The government often does not even meet its own payment date targets. The Commercial Debts (Interest) Act has given for several years those owed money by other businesses a right to charge interest and a late payment collection charge even if there are no written terms of business specifying interest is payable. The right to recover the interest cannot be excluded by a term in the buyer's standard conditions of purchase either.
Anthony Heath a partner and head of our Commercial Litigation Department says:
"Although in practice many businesses do not feel they can charge interest because they hope for future business from the customer concerned, sometimes it is useful at least to threaten to charge it. If the parties have really fallen out then interest and charges can be collected and added to any debt recovery action. If court action is taken then court fees and some of your solicitors' costs in most cases may be recoverable as well from the person who owes you the money.
From 1 January 2006 the interest rate which businesses can charge for late payment has changed. It is fixed twice each year. The latest change follows changes in the Bank of England's base lending rate. It is calculated by adding 8% to the base rate. It is now 12.5%.
In addition a collection charge depending on the amount of the debt can be added from £40 - £100 whether lawyers are used or not.
All businesses however benefit from having written terms and conditions of sale. Even though interest can be charged in any case, written terms of business drawn up by lawyers can provide for rights to recover goods if they are not paid for. Other improvements can be made to improve the business' legal position.
Call Anthony Heath on 0117 9290451 or email aheath@metcalfes.co.uk for more information.
This press release summarises the law on issues which we believe may be of interest to your business. It is not a comprehensive review of the subjects and accordingly is published without responsibility for loss occasioned to any person(s) acting or refraining from action as a result of information published