Interest calculation for partially paid invoices ?

Hi,

I am chasing an ex-client for statutory interest under the Late Payment of Commercial Debts (Interest) Act on several late invoices and I need to know the legal situation wrt how interest is calculated on invoices that have been partially paid ?

Say I was owed £10k and £5k was paid 2 months late and the remainder 4 months late, is the statutory interest calculated at the full rate on £10k for 4 months or should I charge the daily rate on £10k for 2 months and on £5k for 2 months ? Or what ?

Any pointers to the actual legislation that governs this specific topic would be appreciated (I already have links to the LPCD(I)A but that is not specific to this point)

<Edit:> Sorry, I found this post on these forums here payontime.co.uk/forum/pay-on-time-supporter-forums/the-late-payment-of-commercial-debts-interest-act/late-payments-questions-calculating-interest-on-partially-paid-invoices which says "The legislation states that interest runs on the whole amount until paid in full. So for the purposes of the calculation use the date the final instalment payment was received as the payment date."

Can anyone quote me the part of the original legislation where it says that ? (My solicitor has said that partial payment offsets interest)<Edit>

Thanks,

Mike Davies

Bump:

Anyone know exactly where in the legislation it states that " interest runs on the whole amount until paid in full" ?

Many thanks,

Mike

Hi Mike,

I think the issue is that the original act was not particularly well drafted, so it doesn't state unequivocally that "interest runs on the whole amount until paid in full".

But If you look at the act it basically outlines that interest is chargeable at the prevailing rate until payment is received in full.

In addition the original 1998 act and subsequent amendments do not make make any reference to part payment at all and they certainly don't state part payment reduces the interest payable.

We can see the point your solicitor is making and we understand why they may wish to calculate interest separately, but it isn't strictly necessary.

Hope that helps.

A further point of interest is included in the 2002 Guidelines, (page 17)which states "If the purchaser owes the principal and interest, unless payment is accepted on other terms, any part payment of the debt will go to reduce the amount of the interest first",