Make sure you calculate the interest on unpaid debts
Local businesses are being reminded that they are entitled to charge interest on any outstanding debts. Stephen Smith, Chief Executive of EMB Ltd, the organisation responsible for local delivery of the Business Link service explains: “Under revised legislation, you have a statutory right to claim interest on all late payments. Business owners and managers can claim reasonable debt recovery costs and benefit from the simplification of the calculation of Statutory Interest”.
Reference rates are calculated using the Bank of England base rate for a given period. If however, you have decided to set a contractual rate that might be higher or lower than the statutory rate, then the statutory rate no longer applies. Interest should be charged on the outstanding gross amount inclusive of VAT as no VAT is chargeable on the interest itself.
Businesses should also be aware that they can ask a representative body to challenge grossly unfair contract terms used by their customers that do not provide a substantial remedy for late payment of commercial debts.
Business Link provides access to a FREE interactive tool to help you calculate the amount of statutory or contractual interest you are entitled to charge. For more information, contact Business Link on 0845 058 6644 or visit www.businesslink.gov.uk/eastmidlands/interestdue
Posted by: Business Link East Midlands
