We haven't checked late-payment interest or recovery costs
We have been paid late more than once, and nobody has worked out what interest or costs we could claim.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
What's happening?
Late payment may give you a right to interest, compensation or recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. But the remedy is not the same for every contract or invoice. Your subcontract may set its own interest, and how that sits with the Act needs checking before you assume anything.
The start date matters too. Work out when each payment actually became late, rather than counting from the invoice or the due date by habit.
So most subcontractors never claim, and late payment costs their main contractor nothing. A round sum added to the final account is easy to refuse. Even a sound calculation does not guarantee you will be paid it, or that your main contractor will change its habits.
The solution
Find the interest route first: your subcontract's own interest clause, or the Late Payment Act. Then set each payment's final date for payment against the day the money actually arrived. Keep the sum owed and the interest in separate lines, and keep what is confirmed apart from what is still open.
Late Payment Claim builds that schedule, payment by payment with its evidence, and adds it to the demand or the final account. Late Payment Prevention puts the same calculation into every chaser from the first day a payment is late. Any doubt about the remedy goes to your solicitor.
Example
Illustrative example. The scenario and figures are invented.
The facts
A plumbing subcontractor is closing an account of 9 monthly payments. It knows it was paid late more than once and is tempted to add a round sum to the final account. Instead, the record is built first.
What happens
- The subcontract has its own late-payment interest clause. How it sits with the Late Payment Act goes to the solicitor before any figure is worked out.
- Each of the 9 payments is checked: the notified sum, the due date, the final date for payment and the day the money arrived, from the bank statements.
- Four were paid late: £22,000 by 18 days, £31,000 by 9 days, £17,000 by 30 days and £26,000 by 6 days.
- The late-payment interest calculator is run on those four at the rate the subcontract states, from the day after each final date to the day the money arrived. It comes to £450.
- The schedule shows each amount beside its payment, dates and evidence, kept apart from the main account. The solicitor's view on recovery costs is recorded as still open, not added in.
- The commercial decision is to include the £450, because every line of it can be shown.
The four late cycles
| Sum paid late | Days after the final date |
|---|---|
| £22,000 | 18 |
| £31,000 | 9 |
| £17,000 | 30 |
| £26,000 | 6 |
The outcome
The main contractor pays the £450 with the final account without argument. A round £450 with nothing behind it would not have got that.
Sources
- Late Payment of Commercial Debts (Interest) Act 1998. legislation.gov.uk.