Interest
on Your Debt
There are three bases for claiming interest which starts accruing from the day after the money was due to be received:-
1. Interest set out in the creditor’s contract which will be claimed at the rate specified in that contract. This must be fair and not a penalty.
2. Interest under the Late Payment of Commercial Debts (Interest) Act 1998 which is fixed at 8% above the prevailing base bank lending rate. This currently stands at 4.75% (this can be found by going to the website http://www.bankofengland.co.uk/mfsd/rates/baserates.xls).
This applies to contracts made on or after 1st November 1998 and may only be claimed by small businesses (50 employees or under) against large businesses (over 50 employees).
For contracts on or after 1st November 2000, small businesses may claim this interest from other small businesses.
For contracts on or after 7th August 2002, all businesses may claim this interest against all other businesses.
Also, for contracts on or after 7th August 2002, you may claim collection costs once an account is overdue as well as the interest (under The Late Payment of Commercial Debts Regulations 2002):-
- Debts up to £999.99 £ 40.00
- Debts £1,000.00 - £9999.99 £ 70.00
- Debts £10,000.00 and over £100.00
3. Where there is no provision for interest in the contract and the debt does not come within the scope of the Late Payment of Commercial Debts (Interest) Act 1998, interest may be claimed under Section 69 of the County Courts Act 1984 or the Supreme Courts Act 1981. This is currently fixed at 8%.
Interest is claimed when Court proceedings are commenced, on the Claim
Form and also when Judgment is applied for. If the Judgment is then enforced
by way of the High Court Enforcement Officers then they will recover further
interest.