Charging compensation and interest

I sent a customer a letter before action regarding an overdue debt stating that I had added late payment compensation and interest to the sum due. The company has paid the original debt only. I emailed to let them know that I would pursue the charges and they have replied that if I invoice the charges they will pay. Your advice says not to invoice so what should I do? What is the reason for not invoicing?

Hi Ann

I wouldn't worry about whether to issue an invoice for the late payment interest and compensation. Just do it. I don't wish to contradict my highly experienced colleagues but I always suggest to my clients in similar situations that they issue a VAT-free invoice for such charges when claimed. None of them have reported problems with accounts, tax as a result. Even the Government advice says it's OK to issue an invoice - www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt - see at the bottom of the page there.

The only thing to remember is that you can't add statutory late payment interest (8% p.a. above the Bank of England base rate) if you have a lower interest rate mentioned in your terms and conditions (which I see a LOT).

Best Regards
John Hackwood
TermsandConditions.co.uk Ltd

We agree with John.

We have had clients issue invoices for costs and interest with no issue, just be sure to state what the invoice relates to specifically and you should be fine :)