The revised ‘late payment legislation’ is coming into force on the 7 August 2002, from this date all businesses and public sector bodies can claim interest for late payment.
The ‘late payment legislation’ is composed of the Late Payment of Commercial Debts (Interest) Act 1998, as amended and supplemented by the Late Payment of Commercial Debts Regulations 2002, which combined introduce a number of changes and new entitlements including:
To allow creditors to claim a fixed sum of compensation should late payment happen. The compensation is to cover debt recovery costs.
To allow all businesses and public sector bodies to challenge contractual terms that do not provide a substantial remedy for late payment.
To provide small and medium enterprises (SMEs) with the right to have appropriate organisations act on their behalf and challenge contractual terms that try to remove or alter their right to statutory interest.
To create a reference rate which will be used to determine late payment interest rate (the late payment interest rate is the reference rate + 8%).
Guide available for businesses
Better payment practice and Business link have produced “A User’s Guide to late payment legislation” which can be downloaded from the Better Payment Practice Group’s website www.payontime.co.uk/downloads/latepayment download.html. It may also be ordered free of charge from DTI Publications Orderline, Admail 528, London, SW1W 8YT, tel. 0870 1502500, fax. 0870 15022333 or by email at firstname.lastname@example.org.