If you supply another business and they pay you late, you are entitled to interest and to fixed compensation — automatically, without a reminder, without prior notice, and without it appearing anywhere in your contract or your invoice. Most suppliers do not know this, and most of those who do never claim it.
What the Regulations Actually Give You
The European Communities (Late Payment in Commercial Transactions) Regulations 2012, as amended, give effect to the EU Late Payment Directive. They apply to commercial transactions in both the public and private sectors, and not to consumer transactions. The core mechanism is an implied term in every commercial transaction: where the purchaser does not pay by the relevant payment date, the supplier is entitled to statutory late payment interest on the sum outstanding, at the ECB reference rate plus eight percentage points unless the contract otherwise provides. Separately and in addition, there is an automatic entitlement to fixed compensation for recovery costs with no need to prove any costs were incurred: €40 where the debt is under €1,000, €70 between €1,000 and €10,000, and €100 above €10,000 — and beyond that fixed sum, reasonable compensation for recovery costs exceeding it, which can include the cost of instructing a lawyer. These rates and figures are set by statutory instrument, have been amended before, and should be confirmed as current before being relied upon.
Payment Terms You Do Not Have to Accept — and When to Use It
The default payment period for commercial transactions is thirty days unless the contract provides otherwise. Where a business-to-business contract provides for a period exceeding sixty days, that term must generally be expressly agreed and must not be grossly unfair to the supplier — so the extended payment terms buried in a large customer’s standard conditions are not automatically effective, and a supplier who simply accepted them may have more room than they assume. For public authorities the period is generally limited to thirty days. As to why so few claim it: commercial caution, and rationally so — a supplier weighing a modest interest entitlement against a valuable customer relationship usually protects the relationship. The problem is that this becomes a default rather than a decision, so the entitlement goes unused even where the relationship has already ended, where the customer is chronically late, or where recovery has already reached a solicitor. Two practical conclusions. Where there is no relationship left to protect, this is simply money you are owed, and the entitlement does not depend on having been asserted at the time — a payment history is worth reviewing, subject to the ordinary limitation position. And where the relationship continues, telling customers that future late payments will attract statutory interest and compensation frequently changes behaviour without any claim ever being made.
Chronically Late Customers, or a Relationship Already Over?
Send the payment history and the terms of trade. Whether the entitlement is worth claiming is a commercial question - but knowing it exists, and what it is worth, comes first.
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