Late Payments - Interest Charged?
T.C.
Registered, Tutor Posts: 1,448 Beyond epic contributor ๐งโโ๏ธ
If a client has not received payment from their customer and it is in the contract that they can charge interest on late payments, what is a sensible rate to charge the customer, as no rate was agreed with the contract? Any ideas please.
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Comments
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See this link
http://payontime.co.uk/late-payment-legislation-interest-calculators
I'm pretty sure you need to notify before hand. i.e. write to them and state that if payment not received then you will apply the interest as per the legislation.Regards,
Burg0 -
That's brilliant. Thank you very much!0
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See this link
http://payontime.co.uk/late-payment-legislation-interest-calculators
I'm pretty sure you need to notify before hand. i.e. write to them and state that if payment not received then you will apply the interest as per the legislation.0 -
If no rate was agreed in the contract then the Late Payment of Commercial Debt (Interest)Act (1998) applies, as amended in 2002 and 2013.
This provides a statutory right for a business to charge 8% plus the reference rate (set every six months based on the Bank of England base rate) on overdue invoices. You can also add a compensation charge for your recovery fees. There's more information here:
http://www.mycreditcontrollers.co.uk/Articles/2015_01_Interest_on_Overdue_Payments.html
The interest is calculated as simple interest, not compound. Here's an online calculator for late payment interest:
http://www.mycreditcontrollers.co.uk/late_payment_interest_calculator.html
While it may be good practice to warn a customer that you intend to apply late payment interest before you do so, there is no reason why you have to. It is your statutory right.0
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