In November 1998, the UK Government introduced legislation to give businesses a statutory right to claim interest from other businesses for the late payment of commercial debt. The UK was one of the first countries in the EU to introduce late payment legislation to help promote a culture of prompt payment.

Click here for late payment legislation in the EU.

Amended late payment legislation came into force in the UK on 7 August 2002 which fulfilled the UK’s obligations under the EC Directive on late payment and brought additional benefits to businesses.

Your rights and how the changes to the late payment legislation has affected them

From 7 August 2002, the Late Payment of Commercial Debts (Interest) Act 1998 was amended and supplemented to incorporate the features of European Directive 2000/35/EC on combating late payment in commercial transactions.

Under the revised legislation, all business owners and managers can claim reasonable debt recovery costs and can benefit from the simplification of the calculation of Statutory Interest. Additionally small and medium sized enterprises can ask a representative body to challenge grossly unfair contract terms used by their customers which do not provide a substantial remedy for late payment of commercial debts.

The revisions to the legislation also include the simplification of the calculation of statutory interest. A reference rate is now used to determine the late payment interest rate, which is fixed for a six-month period. The late payment interest rate that applies in the UK is the reference rate + eight per cent. The new fixed-reference periods are:

The Better Payment Practice Group have compiled a list of common misconceptions about the late payment legislation.

The following User’s Guide explains how the late payment legislation in England and Wales works for contracts made on or after 7th August 2002. To download a copy in PDF format, use the link below.

All small businesses, with 50 or fewer employees, can use the rights given to them by the Late Payment of Commercial Debts (Interest) Act 1998 to claim interest retrospectively. The table below provides a brief summary of how the legislation works on sales prior to 7 August 2002.

Guidance on how to use the Act is set out in "The Late Payment of Commercial Debts (Interest) Act 1998: A User’s Guide ". To obtain a copy telephone 0870 150 2500 and quote reference URN 00/1308 or click below and dowload a copy in PDF format.