FAQs
What are the rules regarding late payment of commercial debts?
The main rules in this area are derived from the Late Payment of Commercial Debts (Interest) Act 1998. In basic terms if you can agree with your supplier any period of payment terms (i.e. 30, 60 or 90 days) then you must pay within this period.
Any delay in payment will result in the supplier being able to levy a charge for any outstanding time period. As this was intended to be a punitive charge, the Act set this charge at 8% plus the normal bank rate. It is not possible to put terms in a contract to exclude the statutory right of the supplier to ask for a late payment charge.
If there is no set payment term then the Act considers 30 days to be reasonable.
It should be noted that in the event of a failure of your supplier to continue trading and a receiver is appointed, the receiver may be able to count outstanding late payment debts as an asset and this could be pursued for payment through legal action.
A free user guide on late payment legislation (URN 98/823) can be obtained from the Department of Trade and Industry (DTI) (http://www.dti.gov.uk), Tel: 0870 150 2500