Late payment of commercial debts: new developments of interest
The Late Payment of Commercial Debts Regulations 2013 comes into force on 16 March 2013, affecting commercial contracts for the supply of goods or services entered into after that date. In particular, the regulations are intended to encourage a more supplier-friendly approach to payment terms.
Under the Late Payment of Commercial Debt (Interest) Act 1998, parties to relevant contracts are entitled to recover interest on any amounts owing to them that remain outstanding for certain specified periods of time. This can be summarised as follows:
- where the parties have not agreed a payment period for invoices, a 30-day period is permitted after receipt of the goods or services and/or invoice for the goods or services (whichever is later) following which the creditor is entitled to recover interest
- where the parties have agreed a payment period for invoices, interest is not recoverable until after that agreed period has expired
As such, debtors are currently free to agree lengthy payment terms with creditors during which interest would not be recoverable on the amount due.
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