Legal issues
The entitlement comes from the Late Payment of Commercial Debts (Interest) Act 1998 and the associated rate regulations. Before claiming, the contract should be reviewed for any agreed interest or late-payment remedy and to determine whether the debt is a qualifying commercial debt.
If the parties agreed a payment date, that date normally controls subject to the statutory rules on unfairly long terms. If no payment date was agreed, GOV.UK states that payment becomes late 30 days after the later of the customer receiving the invoice or the goods/services being supplied. The applicable statutory interest rate is then based on the relevant six-month reference rate, not simply today's Bank rate.
The Bank of England rate in force on 31 December is fixed as the reference rate for 1 January to 30 June; the rate in force on 30 June is fixed for 1 July to 31 December. The calculation should identify the principal, due date, applicable reference rate, daily rate and any payments or credits.
Evidence that matters
Keep the contract, terms, invoices, due dates, payment history, statements, reminders and evidence of any recovery costs claimed beyond the fixed statutory sum.
Reasonable lines of enquiry
Check whether the debtor has challenged liability, whether a contractual interest clause provides a substantial remedy, whether the debt arose from a qualifying commercial transaction, and whether any payments or credit notes reduce the principal on which interest is calculated.
What happens next
Interest and compensation can be included in a pre-action demand and, where appropriate, pleaded in a court claim. GOV.UK guidance states that if statutory interest is added to a late commercial payment, a new invoice should be sent for the interest claimed.
Immediate steps
Identify every unpaid invoice and due date, check the contract for an interest clause, identify the correct six-month Bank of England reference rate, calculate simple interest to a defined date and keep the calculation transparent.
What should you send us?
Send the contract, terms, invoices, statement, due dates, payment history and any clause dealing with interest, compensation or recovery costs.