Late Payment of debts - Commons Library Standard Note

Published 04 February 2014 | Standard notes SN06640

Authors: Tim Edmonds

Topic: Companies, Small businesses

This note provides a short historical background to the introduction of the Late Payment of Commercial Debts (Interest) Act 1998, which introduced a statutory right for businesses to claim interest on the late payment of commercial debts.

Prior to its introduction, businesses were only able to claim interest if a term to that effect was included in the contract or if the courts decided to award interest in their favour in the course of debt recovery proceedings. Under the Act the right to claim was introduced in three stages.

Modifications to the UK legislation were made by the EU directive on late payment which came into effect in March 2013. A consultation was started in December 2013 to look at further, non-legislative measures to improve the position of small firms.

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