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Many companies are forced to seek advice on bankruptcy because too many of their customers have taken too long to pay them.

From Saturday March 16th, this should change, as the Late Payments Directive (2011/7/EU to use its technical title) comes into effect throughout EU member states.

The precise impact is likely to vary in individual countries, but in the UK the existing three-tiered fixed-fee system chargeable on overdue accounts has been extended to include all reasonable recovery costs incurred while chasing the debt.

Both the fixed fee, and the remainder of any recovery costs, can be charged on top of the original invoice amount and statutory interest at 8% above the Bank of England base rate.

The legislation also renews the assertion of a 30-day standard payment period on invoices where a longer deadline is not mutually agreed, giving businesses a better chance than ever of successfully pursuing debts.

We expect to see fewer businesses seeking advice on bankruptcy due to late payment of invoices they have issued; however, you should be careful to pay the invoices that you receive on time, as the new legislation could see even a single, small overdue bill become a sizeable liability as interest and costs are added to the total.