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misuse of the spirit of the law?

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5 years 4 months ago #1529 by rbw@specdoc.co.uk
We pay our suppliers twicw monthly on 30 days net monthly unless there is a dispute which we discuss with them. This was our payment policy with our subcontract cleaning company between 2009 & Dec 2012. They never had to chase payments and statements would either cross in the postor not need to be issued by them. They were also often our slowest supplier at cashing the cheques indicating that the technical late payment was not a concern to them. However, their Invoices did state 30 days from the date of the Invoice. The cleaning Company is now in Liquidation and the liquidators have sent a bill at the correct interest rate for the days every invoice was paid late and this amounts to £45.51 over 3 years, but there is the Compensation fee of £40 for every Invoice over the 3 years. Our accountants and the FSB feel the liquidators are technically correct, but as the supplier made no issue at the time is this a fair use of the legislation and in particulaer the compensation fee?
We have used the legislation ourselves but would not do so if payment were merely days late and only when the late payment has caused considerable extra work. We have also developed a good relationship with our Customers with regard to payment.

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5 years 4 months ago #1530 by David J
Hello Mary and thank you for your post.

I'm sorry to hear you have a retrospective claim against you.

This should be seen as a warning to all companies who pay later than agreed terms or the default period of 30 days if terms of payment were not agreed.
When a company goes into liquidation, the liquidator has the option to use the legislation to claim interest and compensation going back 6 years on every invoice that was paid late. This is actually based on the limitations act 1980.

I cannot see why your accountant and the FSB say it is technically incorrect. The FSB used to be part of the Better Payment Practice Group so should know better. There is case law and the legislation is there for all to read in black and white.

Late payment is crippling many small businesses and I would like to see more insolvency practitioners using the legislation against late payers to send a strong message to the business community that paying late could eventually catch them up.

lets look at this from another view. If you had a customer go broke owing you money, you would be more than happy to see the liquidator squeeze as much as they can out of their late payers if it helps you get back what you are owed.

So one day this law may actually work to your advantage!

Best regards

David

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