Prompt payment is critical to the cash flow of every business. The Late Payment of Commercial Debts (Interest) Act 1998 (the ‘Act’) therefore implies a term into contracts supplying goods/services between businesses (including public authorities), that “qualifying debts” carry simple interest at a punitive rate (“statutory interest”).
Statutory interest starts to accrue, if payment has not been received, on the day after the “Relevant Day” (as described below) and is calculated as eight per cent above the Bank of England base rate (set at a high rate so as to deter non-payment). As such it is particularly important for the purchasing party to understand exactly when the Relevant Day falls.
This spring, two regulations (The Late Payment of Commercial Debts Regulations 2013 and The Late Payment of Commercial Debts (No. 2) Regulations 2013) have amended the Act, and in particular the way in which the Relevant Day is to be calculated.
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