There is no codified or centralised regulation of the collection of commercial debts and it is unlikely that there will be any regulation to the same extent as there is in the consumer credit sector.

The bargaining positions of parties to a commercial agreement is generally perceived to be more even and do not necessitate any regulation to intervene. In respect of Statutory Demands, the procedure available to set aside is the simplest and most effective method to deal with any actual or alleged imbalances to the relationship between the parties. In relation to ordinary Money Claims through the Money Claim Online system (‘MCOL’), these can only really be looked at on the merits- necessitating, in some cases, a lengthy and expensive examination in Court.

Late payment of commercial debts has been viewed as an inhibitor of business growth, resulting in the Late Payment of Commercial Debts (Interest) Act 1998. More recently, practical initiatives such as the Prompt Payment Code has acquired traction based on the premise that paying suppliers promptly is a marketable trait!

Late Payment Interest and Debt Recovery Costs

The Late Payment of Commercial Debts (Interest) Act allows Creditors to claim interest and debt recovery costs if another business is late in paying for the goods and services provided. The interest rate is pretty impressive, being 8% above the Bank of England Base Rate (currently 0.5% at the time of writing). This is due from the expiry of the ordinary credit period. Where there are no credit terms specified, it will be 30 days from the delivery of the goods/service or invoice (whichever is the later).

The calculation of interest is best conducted on a daily rate basis. The calculation being

(Annual Interest Rate (8% + Base Rate) * Invoice Amount) % 365

In addition, Creditors are also able to charge a fixed sum for the cost of recovering a late payment.

Debt Amount Chargeable Costs
Up to £999.99 £40
£1,000 – £9,999.99 £70
£10,000 or more £100

This affords the Creditor a view that debt recovery activity is a little more cost effective, knowing that a proportion (sometimes all) of the costs associated will be recoverable.

It is interesting to note that the reference, in the legislation, to the delivery of the invoice means that interest and debt recovery costs are chargeable for each invoice that is raised to a Debtor.

It is not uncommon for Creditors to charge Debtors several thousand points in interest and recoverable costs on the basis of a large number of low value invoices raised over a period of time. Indeed, many legal professionals have adopted this legislation as the basis of their charging structure for commercial debt recovery, resulting in a cost neutral proposition for Creditors. Its also a pretty good deal for their advisors (particularly if they are also able to claim costs in the insolvency).

Assuming the Creditor would want to claim debt recovery interest and costs, the calculations (once concluded) should be summarised in the Particulars of Debt section of the Demand. For those using the Part 7 Claim procedure, this will be input in the Particulars of Claim.

It is best to include a statement of account, particularly where there are various invoices attracting different amounts of daily interest.

Calculation of debt recovery interest and costs should follow the following logical process.

We are LincsProcess

We serve legal documents all over Lincolnshire for a fixed fee. We assist our creditor partners and their professional advisors with their debt collection by providing field services aimed at driving recoveries, delivering intelligence and maintaining the customer-supplier relationship.

If you, or one of your clients, would benefit from this approach, get in touch.


We’re not lawyers. We’re process servers. We are not in the business of giving legal advice. These articles are really to put across our own opinion (why else would we write them?) and should not be relied on as legal advice. if you want legal advice, you should always get a solicitor.