The Late Payment of Commercial Debts (Interest) Act 1998 is now in force at least as far as small businesses are concerned.

The Act will enable businesses to claim interest on overdue accounts at the rate currently of 11.75% from the date the invoice falls due for payment.

It is open to suppliers to stipulate an alternative rate of interest in their terms and conditions of trading as the furore over Rentokil’s attempt to do this shows! Providing the supplier provides a ‘substantial remedy’ for late payment, their terms and conditions of trading will be enforceable.

If no credit period has been agreed, then the Act sets a default period of 30 days which runs from either the date of delivery of the goods or the date of receipt of the invoice, whichever is the later.

Whether, in practice, small businesses will consider it politic to bill their customers for interest remains to be seen.

We suspect that the Act will only be used when litigation proves necessary. We have amended our case management software to process claims at the new rate.

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