Can I claim late payment compensation as well as interest?
Yes, where statutory interest runs: the law adds a fixed sum of £40, £70 or £100 for each late payment, plus reasonable recovery costs.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
These are not charges you make up. The fixed sum comes from section 5A of the Late Payment of Commercial Debts (Interest) Act 1998. It depends on the size of the late payment. It is £40 for a payment under £1,000, £70 from £1,000 up to £10,000, and £100 for £10,000 or more. It is a set amount for each late payment, not a percentage, and it comes on top of the interest. If your real costs of recovering the payment are higher, you can also claim the reasonable difference. Keep the invoices for those costs, because a round figure is easy to refuse. The catch is that the fixed sum only comes with statutory interest. If your subcontract has its own remedy for late payment that is substantial, statutory interest does not run, and nor does the fixed sum. Your subcontract's own interest clause then applies instead. So read that clause before you add anything, and ask your solicitor if it is unclear which applies. Then list each late payment with its fixed sum and its interest, on separate lines of your demand.
Example
Illustrative example. The scenario and figures are invented.
The facts
A subcontractor was paid late three times on one job: £6,500, £24,000 and £850, each after its final date for payment. The subcontract has no interest clause of its own.
What happens
- Each late payment is matched to its fixed sum: £70 for the £6,500, £100 for the £24,000 and £40 for the £850.
- The fixed sums come to £210, on top of the statutory interest worked out for each payment.
- A solicitor's letter chasing the £24,000 cost £250. The £150 above that payment's £100 fixed sum is added as a recovery cost, with the invoice attached.
The fixed sums in figures
| Late payment | Fixed sum |
|---|---|
| £6,500 | £70 |
| £24,000 | £100 |
| £850 | £40 |
| Recovery cost above the £100 | £150 |
The outcome
The demand adds £360 in fixed sums and recovery costs, each line tied to its payment and its evidence, alongside the interest.
To have every fixed sum, recovery cost and day of interest added to your demand, see our Late Payment Claim service.