Statutory interest on partially paid invoice

[Contreras]

Say I was owed £10k and half was paid 2 months late and the remainder 4 months late, is the statutory interest calculated at the full £10k proportion of 4 months or at £10k for 2 months and £5k for 4 months ? Or what ?

As I understand it any part-payment goes first towards paying off the interest at that point and then to paying off the principle debt. You only charge interest on the principle debt, i.e. the interest is not compounded. There was a revision to the legislation in 2013 and this is from memory before that so could be out of date or just plain mistaken.

Statutory rate: 8.5% pa.
Fixed fee (debt >=£10k): £100

	Principle	Interest+Fees
			£100.00
Month 1	£10,000.00	£170.83
Month 2	£10,000.00	£241.66
Month 3	 £5,241.66	 £37.13
Month 4	 £5,241.66	 £74.26
Month 5	   £315.92	  £2.24
Month 6	   £315.92	  £4.48
Month 7	   £315.92	  £6.71
Month 8	   £315.92	  £8.95

At end of month 4 the interest has effectively been paid and ~£316. of the original debt remains and this will attract further interest of ~£2 per month going forward.

Please restrict replies to the actual legal situation, rather than what is "just" or "fair", I need to know the actual law about this.

It's explained on the pay-on-time website I'm sure. And I believe there are links to the actual legislation which isn't so hard to follow either. Either would be more authoritative than asking on a public forum.

Of course if you are prepared to write off the interest and are just using it to extort the debt that is owed then it probably doesn't matter how you calculate it.

[VectraMan]

Did you invoice for the interest?

If you show that you are serious enough (by calculating the interest and invoicing for it), then clients that have the money but who are taking the p*** get the incentive to pay up.

If the intent is to get them to pay up, then you don't need to chase the interest too, just use the threat of interest to make them pay. That's a satisfactory outcome as most people would see it. Sure you have a legal right to the interest too, but in terms of your future relationship with the client you're not doing yourself any favours.

But each to their own.

[DirtyDog]

esp when your going to lose £10K hanging on to the last minute as the company goes down

If you think that sending an invoice is a lot of hassle, which isn't worth £250 of your time, either you're on a fantastic rate, or you are doing your invoicing wrong.

[DirtyDog]

When I did this I was happy that the client actually paid the original bill, and let the interest go. I'm sure many would do the same.

Did you invoice for the interest?

If you show that you are serious enough (by calculating the interest and invoicing for it), then clients that have the money but who are taking the p*** get the incentive to pay up.

[tarbera]

its not even a good night out, not worth the hassel

Because on those sums, you'd be stupid not to chase for the £278.42 that you are owed.

- £5000 paid two months late = £68.70 in interest
- £5000 paid founr months late = £139.73 in interest
- Penalty fee for £10000 paid late = £70

Why would you not chase for that??

esp when your going to lose £10K hanging on to the last minute as the company goes down

[VectraMan]

Why would you not chase for that??

When I did this I was happy that the client actually paid the original bill, and let the interest go. I'm sure many would do the same.

[DirtyDog]

Why are you worring about a few quid in interest ?

Because on those sums, you'd be stupid not to chase for the £278.42 that you are owed.

- £5000 paid two months late = £68.70 in interest
- £5000 paid founr months late = £139.73 in interest
- Penalty fee for £10000 paid late = £70

Why would you not chase for that??

[tarbera]

why ??

Hi,

I am chasing an ex-client for statutory interest under the Late Payment of Commercial Debts (Interest) Act on several late invoices and I need to know the legal situation wrt how interest is calculated on invoices that have been partially paid ?

Say I was owed £10k and half was paid 2 months late and the remainder 4 months late, is the statutory interest calculated at the full £10k proportion of 4 months or at £10k for 2 months and £5k for 4 months ? Or what ?

Please restrict replies to the actual legal situation, rather than what is "just" or "fair", I need to know the actual law about this.

Many thanks,

Boo

Why are you worring about a few quid in interest ? If client not paying normally they are going down or you fecked up and they have a reason why they are not paying.

Why are you not round at there office to collect in person before its to late

[Martin at NixonWilliams]

You would only apply the interest to the unpaid element of the invoices, so £10,000 for 2 months and £5,000 for 2 months.

I hope this helps.

Martin

[Boo]

Hi,

I am chasing an ex-client for statutory interest under the Late Payment of Commercial Debts (Interest) Act on several late invoices and I need to know the legal situation wrt how interest is calculated on invoices that have been partially paid ?

Say I was owed £10k and half was paid 2 months late and the remainder 4 months late, is the statutory interest calculated at the full £10k proportion of 4 months or at £10k for 2 months and £5k for 4 months ? Or what ?

Please restrict replies to the actual legal situation, rather than what is "just" or "fair", I need to know the actual law about this.

Many thanks,

Boo