charging interest on late payment

[zeus2009]

can anyone tell me what a typical rate of interest would be for charging clients who have overdue payments?
I read somewhere that upto 8% could be charged.

 

[Geoff T]

Under the Late Payment of Commercial Debts Regualtions 2002, you can charge 8% above the Bank of England base rate.

That's where the "8%" came from - it's actually 8.5% on that basis.

The rate changes apply every June and December

hope that helps.

 

[GRDCredit]

What he said ^^^^^^^^^^^^^

Don't also forget the Compensation fee you can claim under the same legislation which very often comes out at more than the interest payable - £40 on invoices below £1,000

 

[Faith28]

If you use Kashflow it will automatically charge it.

Very handy to know in case one needs to. I don't charge it personally.

 

[zeus2009]

What he said ^^^^^^^^^^^^^

Don't also forget the Compensation fee you can claim under the same legislation which very often comes out at more than the interest payable - £40 on invoices below £1,000

How would this work? Does the compensation fee go up in stages? So if it is more than £1,000 how much would of charge would this be?

 

[GRDCredit]

All you need to know:

http://www.payontime.co.uk/legislation/legislation_main.html

 

[Geoff T]

and if you have trouble with links (like me!) it works like this

amounts up to 1,000 = £40
1,000 to 10,000 = £70
10,000 + = £100

 

[zeus2009]

Thanks Guys for your help.

Much appreciated

 

[elliebateman]

Hi Zeus

You've not said whether your clients are businesses or consumers and you can only use The Late Payment of Commercial Debts (Interest) Act 1998 if your clients are businesses. There is a great online calculator but it won't let me post the link because I've not done enough messages on this site! But go to late- payment- law .co .uk and click on the 'calculator' link on the left hand side. Then you can just enter the amount of the debt and the date it was due to be paid and it works everything out for you.

If your clients are consumers, you can still charge them interest but it's under Section 69 of the County Courts Act 1984 and that is at 8% and with no compensation.

Hope this helps!

Ellie

 

[Geoff T]

Thanks Ellie,

Because I stick to B2B, I keep forgetting the consumer side of things!

ps - I'd advise you check out the update from 1998 to 2002...