The Late Payment of Commercial Debts (Interest) Act 1998 (LPCD(I)A 1998) gives a creditor a statutory right to claim interest on debts that are settled late for sales (or hire) of goods / services made in the course of business. Note both the buyer and seller must be acting in the course of business. Â
Acting in the course of business includes government authorities etc. Section 2 of the LPCD(I)A 1998 details contracts that are exempt including mortgages, consumer credit agreements etc. Â
The interest under section 1 starts to accrue (section 4) after the date for payment specified in the contract (if there is one). Where there is no written contract or no specified payment date then the interest begins to accrue 30 days from the latter of delivery of the invoice or delivery / performance of the goods / services. Â
The interest rate is 8% above the base rate and parties can only contract out of LPCD(I)A 1998 before the debt is created if there is a substantial remedy for late payment in the contract (section 8).