Claiming compensation for every invoice up to 6 years

Hello Eugenie
The 6 years rule is based on the limitations act 1980. This legislation states that you have up to six years to make a claim.

www.legislation.gov.uk/ukpga/1980/58

You can claim interest and compensation on each invoice that has been paid, but was paid late. Of course it helps if you have good accounting records when it comes to calculating the daily interest but the compensation levels of £40, £70 and £100.00 depending on the amount of the principal is fixed even if the number of days late is disputed. The longer you leave it, the harder it will be to calculate and implement but if you need help in this respect, please send me an email.

The minimal changes made by government after 16th March means that terms of payment should not exceed 60 days unless expressly agreed. If there are no agreed terms of payment, the default is 30 days. You can make your own terms of payment to whatever amount of days you like but it should be agreed (preferably in writing) with the client otherwise it would be difficult to enforce.
So for your question, if you have agreed terms of payment that are less than the default of 30 days (say 15 days for example) and the client is late, then you can apply the interest and compensation from the 16th day. This would be the same for any invoices before the 16th March also.

I hope that makes sense!

Best regards

David

Hi Eugenie
I tried to answer that question in the second paragraph starting with 'The minimal changes...'

Basically no. There is no 30 day grace period. Unless of course you want to offer that to your client! The legislation is not compulsory so you don't have to implement it.
That means that if you prefer, you could make your payment terms 10 days from delivery of the goods or services and a late payment interest rate of 12% above the banks base rate. If your client agreed to that, then fine.

Or you can use the legislations default of 30 days before the debt becomes overdue and the current interest rate of 8.5%. So it is flexible.

Most would argue too flexible because it allows clients to stretch payment terms to suppliers by taking the maximum time allowed (under the legislation) to 60 days PLUS add a 30 day verification period of the goods or services. So you are up to 90 days again and within the framework of the legislation they could push the 60 days further and the verification period further!
That's why government in my opinion have done nothing to help small businesses.
I also believe its about time SME's did something about late payers themselves because Government are not there to help you. Apart from the odd guff of hot air from some politicians about naming and shaming or implementing a late payment penalty.

Here are the links to the original legislation of 1998, the amendments in 2002 and the latest changes in 2013. Happy reading!

David

www.legislation.gov.uk/ukpga/1998/20/contents

www.legislation.gov.uk/uksi/2002/1674/contents/made

www.legislation.gov.uk/uksi/2013/395/contents/made

Hi Eugenie
Sadly I'm not surprised the the CAB didn't know about the legislation. Awareness is a key factor for businesses to start using the legislation as a lever for prompt payment. I'm tired of hearing politicians moaning and saying "the legislation doesn't work" Nothing will work if you don't use it! If businesses knew that they may have to pay 6 years of interest and compensation if they paid outside of agreed terms or over 30 days if no terms were agreed how many of them would change their payment habits? (or more than likely negotiate longer payment terms!).
You can help to raise awareness by:
A) signing up as a supporter and displaying the logo on your website and invoices
B) Tell all your friends and business associates about the legislation (and the CAB)

Coming back to your late paying client. What would happen to them if all the suppliers they use and have used over the years implemented the 6 year rule and submitted claims?
I'm working with someone at the moment who wants to get this information added to the company accounts. A buyer may think that a business is solvent on paper when in fact it could be worthless if suppliers collected what they are entitled to under the legislation.

David