Late payment is one of the most persistent problems in the mobile service sector. The average UK SME waits 27 days beyond agreed terms to be paid, and a significant share of invoices are settled even later than that. What most business owners do not realise is that UK law - specifically the Late Payment of Commercial Debts (Interest) Act 1998 - gives them a statutory right to charge interest and fixed compensation on overdue invoices, without needing to go to court first. The right exists automatically. Most owners simply do not use it.
What the Late Payment Act Actually Says
The Late Payment of Commercial Debts (Interest) Act 1998, as amended by the Late Payment of Commercial Debts Regulations 2002, establishes three statutory remedies for late B2B payment:
- Statutory interest at 8% above the Bank of England base rate, accruing daily from the date the debt becomes late.
- Fixed compensation added automatically to every overdue invoice, regardless of the interest charged.
- Reasonable debt recovery costs where interest and fixed compensation do not cover your actual recovery costs.
Important: these rights apply to business-to-business transactions. Consumer debts are governed by separate rules. If you are invoicing a domestic customer (not a business), different legislation applies.
The Fixed Compensation Amounts
The fixed compensation is added to the invoice automatically when it becomes overdue. It does not need to be claimed or invoiced separately - the right exists from the moment payment is late. The amounts are:
| Invoice Amount | Fixed Compensation |
|---|---|
| Under £1,000 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
These amounts are per invoice, not per customer. A customer with three overdue invoices under £1,000 each would owe £120 in fixed compensation alone, in addition to statutory interest.
When Does Payment Become "Late"?
The default payment period under the Act is 30 days for public authorities and 30 days for business-to-business transactions where no payment terms are agreed. If you have agreed payment terms in writing (14 days, 30 days, etc.), payment becomes late the day after those terms expire.
The Act does allow businesses to agree terms beyond 30 days, but terms that exceed 60 days can be challenged as grossly unfair under the Regulations. In practice, many mobile service businesses have no written terms at all - which defaults to 30 days from invoice date.
No written terms means 30 days by default
If you issue an invoice without stated payment terms, the statutory 30-day clock starts from when the customer received the invoice (or the goods/services, whichever is later). This is another reason to have written terms on your quotes and invoices.
How Statutory Interest Is Calculated
The interest rate is 8% per annum above the Bank of England base rate at the date the debt became overdue. The rate resets twice a year (1 January and 1 July) based on the then-current base rate. You can find the applicable rate for any period using the HMRC late payment interest calculator or the Bank of England's published base rate history.
The formula for daily interest is:
Daily interest = (debt amount x (8% + base rate)) / 365
For a £2,000 invoice that is 45 days late, at a combined rate of, say, 13%:
- Daily interest: £2,000 x 13% / 365 = £0.71/day
- 45 days: £32.05 in interest
- Fixed compensation (£1,000-£9,999 band): £70
- Total additional charge: £102.05
That is not a trivial sum on a single invoice - and it scales with the invoice size and the days late.
Why Most Businesses Never Use It
There are three common reasons:
What to Put in Your Payment Terms
You do not need to state the statutory rights in your terms - they exist regardless. But stating your payment terms clearly on every quote, invoice and contract does three things:
- Sets clear expectations upfront, reducing "I didn't know when it was due" disputes.
- Establishes the start date for the late-payment clock.
- Signals that you take payment terms seriously, which tends to improve compliance before any invoice goes overdue.
A straightforward statement covers most situations: "Payment is due within [X] days of the invoice date. Late payments may be subject to statutory interest and fixed compensation under the Late Payment of Commercial Debts (Interest) Act 1998."
When It Makes Sense to Enforce It
The right is automatic. Whether to enforce it is a commercial judgement. A reasonable approach for most mobile service businesses:
- Have the policy stated in writing - in your terms, on your invoices.
- Run a standard reminder sequence first - most late invoices are chased and paid before enforcement is needed.
- Apply it to persistently late payers - where a customer is repeatedly late, the fixed compensation and interest is a reasonable response and a signal that the behaviour has a cost.
- Apply it where the relationship is already ending - if you are not going to work with a customer again, the statutory remedies are there to be used.
- Use it for large or very old invoices - the maths on a large invoice that is three months late justifies the effort of calculating and claiming.
Enforcement Without Court Action
Claiming statutory interest and fixed compensation does not require going to court. You can issue a revised invoice or a separate debt notice that adds the statutory amounts to the original debt. If the customer still does not pay, the combined amount (original invoice + interest + compensation) can be pursued through the Small Claims Court (up to £10,000 in England and Wales) or through a debt recovery solicitor.
The Small Claims Court process is designed to be accessible without legal representation. Court fees are proportionate to the claim size, and the losing party typically pays those fees. For claims under £10,000, the process is often straightforward enough to manage without a solicitor.
This is general information, not legal advice. For complex or contested debts, or if you are unsure how the Act applies to your specific situation, consult a solicitor or contact the Small Business Commissioner, who provides free advice and conciliation for small businesses dealing with late payment.
What Strong Payment Management Looks Like
Payment terms stated on quotes, invoices and contracts - not assumed.
Invoice reminders sent before due date, on due date, and at intervals after - without manual chasing.
A dashboard view of all outstanding invoices, sorted by age - so nothing ages quietly without action.
Every invoice includes a payment link so the customer can pay in seconds - removing friction from the process.
Customers can view, download and pay invoices themselves - reducing the need for back-and-forth.
Average payment time by customer tracked and used to inform credit decisions on future jobs.
Bottom Line
The Late Payment of Commercial Debts (Interest) Act 1998 gives UK businesses a statutory right to charge interest and fixed compensation on overdue B2B invoices. The right is automatic. Most mobile service businesses leave it unused - partly from not knowing it exists, partly from not having the invoice management process to apply it consistently.
The practical steps are straightforward: state your payment terms clearly on every document, run a structured reminder sequence, and apply the statutory remedies where it is commercially appropriate to do so. The law is on your side. The question is whether your process is set up to use it.
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