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Changes To The Late Payment Legislation

The late payment of commercial debts regulations 2013 have now been implemented.

Changes to the legislation were tabled at European level which needed to be adopted by England, Wales and Northern Ireland. Consultation ensued and now the existing legislation has been amended. The Late Payment of Commercial Debts Regulations 2013 was introduced on the 16th march 2013

Summary of the amendments and new measures introduced on the 16th March 2013

Business to business payment terms

If no payment terms are agreed , the default period remains at 30 days. However payment terms must not exceed 60 days unless both parties agree and the extension is not grossly unfair.

Public Sector payment terms

Payment must be made within 30 calendar days of receiving an invoice.

Compensation for recovery

The 3 tiered level of compensation remains at £40.00 under £1000.00, £70.00 under 10,000 and £100.00 over £10,000

Further recovery costs

If the compensation fees do not cover the cost of your claim, it is now possible to claim 'reasonable' additional costs. For example, if you use the services of a debt recovery agency, you can now add that to your claim.

Verification period

Where required, a procedure or verification period of goods or services must not exceed 30 days unless agreed and not grossly unfair to the creditor.

So what has actually changed?

In practice, very little. Many years ago under the previous administration there started a commitment to prompt payment by the public sector, brought into the public domain through the public sector performance league tables. What this change does do though is emphasise suppliers' rights to claim interest and compensation. Being a public body it would be hoped that suppliers are less fearful of exercising that right.

However the right to claim further recovery costs is a good addition. The compensation levels of £40.00, £70.00 and £100.00 have not changed since their introduction in 2002 and are inadequate in most claims. A study of your own collection process will reveal the true cost of chasing late payers. Now you have the option to add that cost to your claim.

And what of what constitutes fair dealing with agreements outside of the legislation? One would hope that suppliers would try to avoid agreeing a remedy other than their statutory right because it would be costly and lengthy to establish what 'gross deviation from good commercial practice and contrary to good faith and fair dealing' actually is in any particular case.

One of the most important legal rights that has not changed is the right to delay claiming for interest and compensation retrospectively for up to six years. This is a little known fact amongst habitual late payers but hopefully an increasingly known fact amongst savvy suppliers who use this website. Used extensively it could have a profound impact upon the culture of late payment within the UK, with the ability to put ££s back in the accounts of long suffering firms. There will be more information available very soon regarding one's firm's experience in using this legislation to claim retrospectively.

Documentation

Late Payment of Commercial Debts (Interest) Act 1998

The Late Payment of Commercial Debts Regulations 2002

The Late Payment of Commercial Debts Regulations 2013

 

 
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