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Compensation & Interest

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12 years 3 months ago #773 by info@elektrika.co.uk
Compensation & Interest was created by info@elektrika.co.uk
Hi David
I have a customer who has consistantly paid late. All the usual excuses, cheque in post, director on holiday etc. etc. etc. Any way they have not used me for approximately 2 months now (I am an Electrical Contractor), which is leading me to believe they are using a number of contractors on a rota basis, because of payment issues. My question is this, I have 5 invoices outstanding amounting to approximately £800.00 all issued within the same month. Is compensation payable on them as one amount, ie £40.00, or can they be treated as five seperate claims and thus five conpensation amounts of £40.00 each?

Regards
Bruce

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12 years 3 months ago #774 by David J
Replied by David J on topic Re: Compensation & Interest
Hello Bruce

The option to batch the invoices together or charge compensation on each invoice is your choice. The compensation is meant to cover the costs of making a claim for interest.

If you took the legislation to the letter, you could charge £40.00 per invoice. However the legislation says that you are entitled to 'reasonable' compensation.

The trouble is, what is 'reasonable'? £40.00 or £200.00 or anything in between.

Only a judge has the power to decide what is 'reasonable'. So if you feel the claim will end up in small claims court best to go for the maximum. If you just want to get your invoice paid, then maybe choosing a compensation level that you feel is 'reasonable'(and if that is £200.00, fair enough) would be a better option. Make sure you let the debtor know that you are being 'reasonable'!

Not a clear cut answer but that's the legislation for you!

Anyway I hope that helps

Regards

David

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12 years 3 months ago #776 by info@elektrika.co.uk
Replied by info@elektrika.co.uk on topic Re: Compensation & Interest
Thanks David, much appreciated.

Best Regards

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12 years 3 months ago #779 by alec@anywhere.ltd.uk
Replied by alec@anywhere.ltd.uk on topic Re: Compensation & Interest
The legislation doesn't actually state that the amount has to be 'reasonable', it says "Once statutory interest begins to run in relation to a qualifying debt, the supplier shall be entitled to a fixed sum (in addition to the statutory interest on the debt)" and sets the amount of compensation.

While a judge may be able to order a lower amount of interest than the statutory amount under certain circumstances the rate of compensation per debt is set in stone - as long as even a minimal amount of interest is allowed on each debt.

The real issue would be whether the invoices are actually separate debts or a single debt artificially split onto separate invoices.

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  1. Discussions forums
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  5. The late payment of commercial debts (interest) Act.
  7. Compensation & Interest
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