When a commercial invoice is overdue, many creditors ask the same cash-flow question: can you add collection costs to a commercial invoice? Sometimes yes — but only in defined ways. On a qualifying business-to-business contract the Late Payment framework can support statutory interest, fixed compensation, and, in some cases, a further sum for reasonable recovery costs. That is not the same as loading every agency commission onto the debtor by default.
Debt Collection UK (a trading style of PASECOM GROUP LTD) introduces B2B files to independent partner agencies. We are not solicitors, we are not authorised by the Financial Conduct Authority, and we do not collect consumer credit. PASECOM GROUP LTD was incorporated on 7 April 2026. We introduce commercial claims; we do not issue proceedings. Partners collect. Recovery is not guaranteed.
This guide is for undisputed business-to-business balances. For the wider service path see unpaid invoices and debt collection agency. Related hub reading: late payment compensation £40 / £70 / £100, statutory interest on late commercial debts, letter before action for business debts, no collection, no fee explained, and proof of debt documents.
What the Late Payment framework allows
GOV.UK summarises the position in plain terms: where another business is late paying for goods or a service, you may be able to claim interest and debt recovery costs under the commercial late-payment rules — see GOV.UK late commercial payments.
The core statute is the Late Payment of Commercial Debts (Interest) Act 1998. Once statutory interest runs on a qualifying debt, section 5A also gives a fixed compensation sum:
- 1. £40 where the debt is less than £1,000.
- 2. £70 where the debt is £1,000 or more but less than £10,000.
- 3. £100 where the debt is £10,000 or more.
Those fixed sums sit in addition to statutory interest. They are not a licence to invent larger “admin fees”, and they do not make recovery free. More detail: late payment compensation and statutory interest.
Reasonable recovery costs beyond the fixed sum
For many contracts entered into on or after 16 March 2013, the Late Payment of Commercial Debts Regulations 2013 amended section 5A. Subsection (2A) provides that if the supplier’s reasonable costs of recovering the debt are not met by the fixed sum, the supplier is also entitled to a sum equal to the difference between that fixed sum and those reasonable costs.
In practice:
- 1. Start with principal, VAT (where charged), statutory interest, and the correct £40 / £70 / £100 band.
- 2. Keep a short note of actual, reasonable recovery spend that exceeds the fixed band — for example proportionate credit-control time or external costs you can evidence.
- 3. Do not assume every agency commission, solicitor estimate, or internal overhead automatically qualifies. The statutory test is reasonableness, not “whatever you spent”.
These rights can strengthen a proportionate letter before action. They do not transfer a partner’s contingent commission onto the debtor merely because you instructed, and they do not guarantee payment.
Contractual clauses vs statutory rights
Creditors often mix up two routes:
- 1. Contractual clauses — your terms may say the buyer pays collection costs if the invoice is late. Enforceability depends on incorporation, clarity, and proportionality. A vague “debtor pays all costs” line is weaker than a clear clause the buyer accepted.
- 2. Statutory Late Payment rights — interest, fixed compensation, and (where section 5A(2A) applies) reasonable recovery costs above the fixed sum.
You can often rely on the statutory route even where the contract is silent on collection costs — provided the debt is a qualifying commercial debt and interest has begun to run. Where the contract already gives a workable costs clause, take care before double-counting the same spend under both routes. Do not invent a costs claim that neither the contract nor the statute supports.
A partner’s commission is not automatically recoverable
Partners introduced through this site usually work on a fixed percentage / commission of what they recover (often no-collection, no-fee). Marketing on this site describes 15% only when the client is paid. That fee is your commercial arrangement with the partner.
It is not automatically a sum the debtor must pay just because you instructed. Recoverability still turns on your contract, the statutory reasonable-costs test where it applies, and what is proportionate. Do not tell a debtor that “agency fees are always added by law”. Keep the partner fee separate from the Late Payment schedule. More: no collection, no fee explained.
How to set the figures out before you escalate
Company-versus-company files should usually follow Practice Direction – Pre-Action Conduct and Protocols: set out the claim, list key documents, say what you want and by when, and allow a reasonable time to reply — typically 14 days in a straightforward case.
In the letter and schedule, itemise invoice principal and VAT; statutory interest; the fixed compensation band; any further reasonable recovery costs under section 5A(2A) (with a short evidence note) or contractual costs you rely on; and the total with a pay-by date. Vague “plus costs” language is weaker than a stated sum.
If the debtor raises a genuine written dispute, pause pre-legal collection until you answer it with evidence. Pre-legal chase is for undisputed commercial debt. Detail: letter before action for business debts. Assemble the pack first: proof of debt documents.
Lawful Late Payment figures can improve cash-flow economics without jumping straight to court. Small claims routes still exist but are often slower and bring separate fees — see GOV.UK make a court claim for money. Debt Collection UK does not issue proceedings. Partners collect. Recovery is not guaranteed.
A calm checklist before you add costs
- 1. Confirm the debt is a qualifying commercial (B2B) supply and still undisputed.
- 2. Calculate statutory interest and the correct fixed compensation band.
- 3. Decide whether any further sum is a contractual costs claim, a section 5A(2A) reasonable-costs claim, or neither.
- 4. Evidence the extra sum; do not pad it with every overhead or the full contingent commission by default.
- 5. Put the schedule in a proportionate Practice Direction letter.
- 6. If silence continues, instruct a partner on agreed fixed-percentage terms — 15% only when the client is paid — without pretending that fee is automatically owed by the debtor.
Frequently asked questions
Can you add collection costs to a commercial invoice under UK law? On a qualifying B2B contract, the Late Payment of Commercial Debts (Interest) Act 1998 can support statutory interest and fixed compensation (£40 / £70 / £100). Where section 5A(2A) applies, you may also claim reasonable recovery costs above that fixed sum. Contractual costs clauses are a separate route.
Are debt collection agency fees automatically recoverable from the debtor? No. A partner’s contingent commission is your arrangement with the partner. Recoverability from the debtor depends on contract terms and, where relevant, the statutory reasonable-costs test — not on instruction alone.
What is the difference between fixed compensation and reasonable recovery costs? Fixed compensation is the statutory £40 / £70 / £100 band once interest runs. Reasonable recovery costs under section 5A(2A) are an additional sum equal to the shortfall if your reasonable recovery spend exceeds that fixed band.
Should I put Late Payment figures in a letter before action? Yes, where they apply: itemise interest, fixed compensation, and any evidenced reasonable (or contractual) costs. Follow the Practice Direction – Pre-Action Conduct and Protocols for company-versus-company claims.
Does instructing through Debt Collection UK make recovery free? No. This guide is free. Partners usually charge a fixed percentage / commission of what they recover (often no-collection, no-fee). Marketing on this site: 15% only when the client is paid, agreed before they start. Recovery is not guaranteed.
Can Debt Collection UK sue the debtor for collection costs? No. We introduce B2B files to independent partner agencies. We are not solicitors and we do not conduct litigation. You remain the creditor if court action is needed.
If an overdue commercial invoice is blocking cash flow, set out lawful Late Payment figures clearly rather than hoping another soft reminder will clear the balance. This guide is free. Instructing a partner is not: fees are usually a fixed percentage of what they recover (often no-collection, no-fee; 15% only when the client is paid), agreed before they start. Recovery is not guaranteed. Upload the invoice and terms when you are ready to instruct.