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Can a business recover costs associated with recovering the late payment of invoices?

If it is a business-to-business debt that has been recovered, then subject to a few conditions, yes.

The first port of call is to check your terms and conditions. If you have a clause which allows you to recover your reasonable costs in recovering an overdue debt, then you should send details of them to the debtor for payment. 

If your terms and conditions do not allow you to recover reasonable cost then, as long as the contract was entered into after 16 March 2013, the Late Payment of Commercial Debt (interest) Act 1998 may give youbusiness the right to recover costs. 

The relevant provision is section 5A (2A) which provides:

“If the reasonable costs of the supplier in recovering the debt are not met by the fixed sum, the supplier shall also be entitled to a sum equivalent to the difference between the fixed sum and those costs.” 

You have to satisfy a number of conditions to be able to rely on this, as follows:

  • The contract was entered into after 16 March 2013 
  • The contract cannot exclude the right to interest under the Act 
  • Interest must begin to run in relation to the debt 
  • The fixed sum (see below) being recovered must not be greater than the full amount of the costs (the expenses incurred by the company)
  • The costs must be reasonable 


The fixed sum that you can recover depends on the amount of the invoice:

  • Invoices up to £999.99 – £40 per invoice
  • Invoices from £1,000 – £9,999.99 – £70 per invoice
  • Invoices over £10,000.00 – £100 per invoice


If your contract is silent on the recovery of interest, under the act you are entitled to recover interest at a rate of 8% over the Bank of England Base Rate%. If your contract stipulates an interest rate then you must stick to that rate.

At what stage can I recover interest?

Interest is calculated from the end of the agreed credit period, so as an example, if there are 14 or 30 days credit, interest will run from the end of that relevant period. If the contract is silent as to when payment was due then the Act stipulates a period of 30 days would be deemed to be reaosnable.

How can I work out what I am owed?

The example which follows will show you how to calculate what you are owed.

Your business is owed £7500 and the Bank of England base rate is 0.25%.

The annual statutory interest on this would be £618.75 (£7,500 x 0.0825 = £618.75).

The daily interest would be £1.69 (£618.75 / 365 = £1.69).

Multiply the daily interest by the number of days the payment is overdue to calculate exactly how much is owed.

When adding on the fixed sum compensation, use this guide:

For invoices up to £999.99 £40 per invoice

For invoices from £1,000 – £9,999.99 £70 per invoice

For invoices over £10,000.00 £100 per invoice

Can I also recover the legal costs of instructing a solicitor or collection agency?

If your reasonable costs of recovering the debt total more than the fixed sum above, you can recover the costs over and above the fixed sum, as long as they have been reasonably incurred. This can include the administration cost to your business as well as any costs you may incur from instructing Debt Collection Agencies or lawyers.

How long have I got to claim?

The Act allows you not only to recover interest on current outstanding overdue debts, but also debts going back over six years, but which were paid late.

Of course, you may want to consider waiting until the customer is no longer a customer before you decide to take legal action. At that point you can send them a demand for all the outstanding interest and fixed sums on all of the invoices they failed to pay on time.

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