JH LAW Solicitors
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Transcript of JH LAW Solicitors
JH LAW Solicitors
Topics covered:-
1.Late payment of commercial debts (interest) Act (as amended)
2.What does the Act mean?
3.What Compensation?
4.What interest rate?
5.How does this get you paid?
6.How to get paid?
7.Useful sources of information
0845 638 4440
JH LAW Solicitors
0845 638 4440
Late payment of commercial debts (interest) Act (as amended)
• Only applies to business to business debts.
• Will be excluded if your/ their terms and conditions provide for something else.
JH LAW Solicitors
0845 638 4440
What does the Act mean?
• Unless terms and conditions say otherwise, the default credit term is 30 days.
JH LAW Solicitors
0845 638 4440
What does the Act mean?
• As soon as the payment is overdue, you are automatically entitled to compensation and interest on the debt.
JH LAW Solicitors
0845 638 4440
What does the Act mean?
• Even if the payment is then made, you can still persue them for the compensation and interest (but you may chose not to)
JH LAW Solicitors
0845 638 4440
What Compensation?
• It depends on the size of the debt.
Size of unpaid debt Sum to be paid to creditor
Up to £999.99 £40
£1,000 to £9,999.99 £70
£10,000 or more £100
JH LAW Solicitors
0845 638 4440
What Interest Rate?
• The rate is fixed as the reference rate applying when the payment became overdue + 8%
JH LAW Solicitors
0845 638 4440
What Interest Rate?
• The reference rate for 1st January to 30th June is:-
The Bank of England base rate on 31st December.
JH LAW Solicitors
0845 638 4440
What Interest Rate?
• The reference rate for 1st July to 31st December is:-
The Bank of England base rate on 30th June.
JH LAW Solicitors
0845 638 4440
Period Reference RateInterest Rate (Reference rate plus 8%)
1st January – 30th June 2009 2% 10%
1st July - 31st December 2008 5% 13%
1st January – 30th June 2008 5.5% 13.5%
1st July - 31st December 2007 5.5% 13.5%
1st January – 30th June 2007 5% 13%
1st July - 31st December 2006 4.50% 12.50%
1st January – 30th June 2006 4.50% 12.50%
1st July - 31st December 2005 4.75% 12.75%
1st January – 30th June 2005 4.75% 12.75%
1st July - 31st December 2004 4.50% 12.50%
1st January – 30th June 2004 3.75% 11.75%
1st July - 31st December 2003 3.75% 11.75%
1st January – 30th June 2003 4% 12%
7th August – 31st December 2002 4% 12%
What Interest Rate?
JH LAW Solicitors
0845 638 4440
What Interest Rate?
Example:
“A” invoiced “B” £100 on 01.11.08Credit term = 30 days
Payment due on or before 01.12.08
Overdue on 02.12.08 Compensation £40
JH LAW Solicitors
0845 638 4440
What Interest Rate?
Example:
Interest rate is the Bank of England baserate on 30.06.08 = 5% + 8%
= 13 %
JH LAW Solicitors
0845 638 4440
What Interest Rate?
Example:
Daily interest is: £ 13 ÷ 365
£ 0.04 (actually £0.0356 but round up)
JH LAW Solicitors
0845 638 4440
What Interest Rate?
Example:
So as at today, the amount owed wouldbe:-
£ 100 principal debt£ 40 compensation£ 4.56 interest (£0.04 x 114 days (02.12.08 – 26.03.09)
£144.56
JH LAW Solicitors
0845 638 4440
How does this get you paid?
It only will if you let customers know in advance the penalties they face if they don’t pay on time.
JH LAW Solicitors
0845 638 4440
How to do this?
• agree payment terms at the outset.
• send a reminder setting out the compensation and daily interest that will apply if not paid within the credit period.
• be consistent.
JH LAW Solicitors
0845 638 4440
How to do this?
These are all tasks which can be delegated to staff members, as long as they are told what they need to do.
JH LAW Solicitors
0845 638 4440
Useful Sources of information
• www.payontime.co.ukThey have a “legislation and interest calculator” which helps you work out what compensation and interest applies.
• www.berr.gov.uk/files/file37581.pdf “A users guide to late payment legislation” this has a very useful FAQ section.
JH LAW Solicitors
0845 638 4440
and finally…
HMRC Business Payment Support Service
www.hmrc.gov.uk/pbr/2008/business-payment.htm
JH LAW Solicitors
0845 638 4440
If it would assist your business to defer paying your VAT, National Insurance, PAYE or Corporation tax then HMRC will agree to do this.
But you need to contact them before the payment is due.