On 16 March 2013, changes to the Late Payment of Commercial Debts (Interest) Act 1998 (the “Act”) and its regulations will come into force in England, Wales and Northern Ireland.  The Late Payment of Commercial Debt Regulations 2013, laid before Parliament on 22 February 2013, implement the replacement EU directive 2011/7/EU, which aims to reinforce existing legislation to tackle late payments in commercial transactions throughout Europe.

The Act provides a way of obtaining interest in relation to the late payment of commercial debts, at a rate of 8% over the current base rate. 

The amendments introduce the following provisions which will apply to contracts entered into on or after 16 March 2013:

  1. For transactions involving non-public authority purchasers, there will be a maximum payment period of (i) up to 60 days, or (ii) a longer period by express agreement between the parties, subject to the agreed period not being ‘grossly unfair’ to the supplier.
  2. For transactions involving a public authority purchaser, there will be a maximum payment period of 30 days.
  3. The start of the payment period is to run from the later of the (i) receipt of the supplier’s invoice, (ii) the receipt of the goods and/or services, and (iii) where expressly agreed between the parties and subject to the terms not being ‘grossly unfair’ to the supplier, from the time at which the purchaser confirms the goods and/or services are in accordance with the contract.
  4. The supplier will have a  right to recover the reasonable costs of recovering any debt where the amount exceeds the fixed charge sums, which themselves remain unchanged from the existing three tier arrangement based on the size of the debt currently set out in the Act.

Similar amendments are to be made in Scotland with the coming in to force of The Late Payment of Commercial Debts (Scotland) Regulations 2013 on 29 March 2013, which will apply to contracts entered into from that date.

Copies of the new regulations can be accessed here:

The Late Payment of Commercial Debt Regulations 2013

The Late Payment of Commercial Debts (Scotland) Regulations 2013