Legal Procedure for Creditors in the UK!


Late payment legislation in the UK requires the private and public sector to pay within 60 days and 30 days respectively. It allows for additional fees if the compensation amount does not cover the claim costs.

You must remember that if the contract has a provision for late payment interest, the statutory right to interest and the right to reasonable debt recovery costs will not apply. An enterprise may decide to contract for reasonable recovery costs in case of late payment. When the case goes to the court, the creditor may recover from the court some of the costs and disbursements incurred.

The law deems a payment late when it is made after the last day of the credit period, agreed upon in a contract, either in writing or orally. In cases where no credit period has been agreed, the legislation sets a default period of 30 days after which interest can run along with the principal. Where no credit period is agreed, the principal debt would become due from the moment the service is performed or the goods are delivered.

Some contracts stipulate that the price be paid in full before the delivery of goods, or performing of service. If the debtor has failed to pay before that, the statutory interest starts to run after the day on which the service was performed or the goods were delivered.

Generally, the legislation does not give a right to interest unless part of the service is performed, or some of the goods have been delivered unless contractually agreed. The parties may make a provision in the contract to agree otherwise. In such case, the contract would provide for a substantial remedy as well.

Most businesses will hire a debt recovery agency in the UK to obtain their money rather than filing a case straight away. Legal proceedings are time consuming and reaching a settlement out of court is always a better option.