Top Service News
Claiming statutory interest on your debts
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The complex nature of construction contracts means it is all too easy for construction businesses to pay you later than is agreed or even pay less than you are entitled to.
The problem is exacerbated in times of economic unpredictability, when cash retention becomes a greater priority for many businesses.
It means recovering debt and monies owed is an expensive process for businesses within the construction sector. Generally there will be a cost involved in retrieving your debt, as well as your time taken.
Is there anything you can do to help recoup some of these costs?
The good news, is yes, you can.
You are entitled to claim statutory interest on late payments for goods and services.
If you currently have any debts owed to you, Top Service offers a debt recovery service, exclusively for businesses within the construction sector. We can help you claim statutory interest from late payers.
What does a late payment mean on commercial debts?
As a construction business who is overdue payment, to know if you are entitled to claim statutory interest, you need to fully understand what a late payment means on a commercial debt, and therefore at which point you can claim statutory interest.
If you have offered credit terms and agreed a payment date, a late payment is when you have not been paid within the period set out in the credit terms and therefore by the agreed date.
In cases where credit terms have not been established and agreed, there is a default period of 30 days from either completion of the work or the day the customer receives the invoice, whichever happens first.
If, however, a contract clearly states that there are no credit terms, payment is due as soon as the goods or services are delivered. For instalment payments, interest runs from the day after an instalment is due.
What is statutory interest?
Simply put, statutory interest is your legal right to charge interest on late payments.
How to claim interest on a debt?
Emma Reilly, Managing Director of Top Service, explains,
“If you want to claim interest on a debt, we advise to put your intentions forward in a written notice.
You should send a letter to your customer, or debtor, informing them of:
- The work you carried out or supplied
- The interest that is owed to date, and the ongoing daily rate
It is important to realise you have the right to claim interest under the Late Payment of Commercial Debts (Interest) Act 1998.
Your letter will clarify to the recipient how much their late payment is costing their own business.”
How much interest can I claim on my debt?
Currently, the statutory interest rate is set at 8% above base rate.
If an alternative interest rate has been specified in a contract, you cannot claim statutory interest. Instead, you must claim contractual interest at the agreed rate.
To help you calculate how much interest you should be charging, Top Service has created a handy interest calculator for both statutory interest and contractual interest.
What is the statutory interest rate?
The statutory interest rate was introduced in three stages through the Late Payment of Commercial Debts (Interest) Act of 1998 and the Late Payment of Commercial Debts Regulations 2002 and 2013.
The first stage of the Act allowed small businesses to claim interest from large businesses and public sector entities. A small business is classed as such when it has 50 or fewer employees.
In November 2000, this legislation was extended to also allow small businesses to claim statutory interest from other small businesses. By November 2022, interest could be charged by all businesses including public sector organisations.
Further amendments were introduced in 2013 regarding compensation payments, time to pay and fixed penalty charges.
How can Top Service help with your debt?
Top Service provides a comprehensive debt recovery service for construction companies. We use our construction and financial expertise, as well as experienced negotiation skills, to act on your behalf in recovering bad debt.
We provide the following services:
Chasing letters and emails
Debt recovery
Pre-litigation
Retention collection
Post insolvency debt collection
Collections consultation service
Our debt recovery service is a valuable solution across all scenarios, including if you’d prefer to continue trading with your debtor, you believe there might be a dispute or there has been very little third party collection activity to date.
Emma Reilly, Managing Director of Top Service, comments,
“Our team here is highly trained at recovering debts for our customers, and have great experience within the construction sector.
For us, part of the debt recovery process is educating our customers to improve their financial processes going forward, which is debt prevention.
Our Insider Intelligence membership is a great resource for debt prevention, which helps our 3000 plus Members with a competitive advantage within the construction sector. In particular, the trading experiences is what really sets us apart from other credit reference agencies.
Trading experiences are where members share their experiences within the community as to who are they working for, and whether they are being paid on time, late, or not at all.
The best part is, membership to our Insider Intelligence only costs £49 + VAT per month and there are no fixed contracts involved. And often, the statutory interest we help our customers to recover is more than the £49 membership, meaning they effectively pay their membership fee from the money we help them to recover. It’s a win win!”
If you’d like more information about the Top Service debt recovery service exclusively for the construction sector, please call 01527 518800 to speak to a member of our expert team.