The fixed compensation you can claim on a late invoice

When another business pays you late, you can claim two things under the Late Payment of Commercial Debts (Interest) Act 1998: statutory interest, which grows for every day the invoice is unpaid, and a fixed sum of compensation, which is the same however late the payment is. This page explains the fixed sum.

The three amounts

These figures come from section 5A of the Act and are repeated by GOV.UK. The band depends on the amount of the debt, which for a normal invoice is the amount of that invoice, not the combined total of everything one customer owes you.

Where the edges fall

Because the first band is less than £1,000, an invoice for exactly £1,000.00 is in the £70 band, and exactly £10,000.00 is in the £100 band.

• An invoice of £500.00: £40.00
• An invoice of £999.99: £40.00
• An invoice of £1,000.00: £70.00
• An invoice of £9,999.99: £70.00
• An invoice of £10,000.00: £100.00
• An invoice of £25,000.00: £100.00

What else you can claim

• Statutory interest, 8% a year over the Bank of England base rate, for every day the invoice is late.
• Reasonable recovery costs above the fixed sum. If what it really cost you to recover the debt is more than the fixed sum, section 5A(2A) lets you claim the difference. GOV.UK says suppliers can claim reasonable costs each time they try to recover the debt.

What to know before you add it to a claim

• The fixed sum is owed once interest has started to run, and you can only charge it once for each payment.
• It is for business-to-business debts. It does not apply to consumers.
• It is generally treated as outside the scope of VAT. Check with HMRC or your accountant if you are unsure for your business.
• As with interest, GOV.UK suggests sending a new invoice if you decide to charge it. Here is a template for the letter and the invoice wording.