When another UK business pays a commercial invoice late, you may be entitled to more than the principal and a reminder. Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim a fixed late payment compensation of £40, £70 or £100 on each qualifying overdue invoice, on top of statutory interest.
That sum is set by law. It is not a collection fee you invent, and it is not a guarantee that the debtor will pay. 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. Recovery is not guaranteed.
What does the law say about late payment compensation?
Section 5A of the Late Payment of Commercial Debts (Interest) Act 1998 is the rule. Once statutory interest begins to run on a qualifying debt, the supplier is entitled to a fixed sum in addition to that interest:
- for a debt less than £1,000, £40 ;
- for a debt of £1,000 or more but less than £10,000, £70 ;
- for a debt of £10,000 or more, £100.
GOV.UK puts the same bands in plain English and states you can charge the business once for each payment. The fixed sum is meant to cover part of the cost of recovering a late commercial payment. It sits beside interest, not instead of it.
Section 5A(2A) goes further: if your reasonable costs of recovering the debt are not met by the fixed sum, you may also claim the difference. Whether a partner agency’s commission counts as a reasonable recovery cost on your file is fact-specific. Never invent a figure in a letter before action.
When does the £40 / £70 / £100 band apply?
Compensation follows statutory interest. Interest only starts when you have a qualifying commercial debt that is legally late. GOV.UK explains when a payment becomes late:
- If you agreed a payment date , that date must usually sit within 30 days for public authorities or 60 days for business transactions (longer business periods must still be fair).
- If you did not agree a date , the payment is late 30 days after the later of the customer getting the invoice and you delivering the goods or service.
The Act applies to contracts for the supply of goods or services where both sides act in the course of a business. Typical company-to-company and sole-trader-to-business invoices qualify. Consumer (B2C) invoices do not. Employment contracts and certain security arrangements are outside the regime.
For the day-count on your own file, see when a commercial payment is legally late. For the interest rate itself (8% plus Bank of England base rate), see statutory interest on late commercial debts.
How do you work out which band applies?
Use the amount of the overdue debt for that invoice, not your whole ledger:
| Amount of debt | Fixed compensation |
|---|---|
| Up to £999.99 | £40 |
| £1,000 to £9,999.99 | £70 |
| £10,000 or more | £100 |
GOV.UK confirms those amounts are set by late payment legislation and that you charge once per overdue payment. A £450 invoice attracts £40. A £4,500 invoice attracts £70. A £12,000 invoice attracts £100. Part-paid invoices can still attract compensation on the overdue balance where the Act applies — work from the debt that is late, and keep the arithmetic honest.
Add statutory interest separately. Put both figures in any chase letter or revised invoice so the debtor can see the principal, the interest calculation, and the fixed sum.
Is compensation the same as agency fees?
No. The £40 / £70 / £100 sum is a statutory right against the debtor on a qualifying late commercial debt. A partner agency’s fee is a commercial arrangement between you and that agency.
On files introduced through this site, partners usually work on a fixed percentage / commission of what they recover (often structured as no-collection, no-fee), agreed in writing before they act. That percentage is not the statutory compensation band, and it is not “recovery for free”. The guide you are reading is free. Instructing a partner to chase the invoice is not.
We introduce the file. We do not collect it ourselves. We do not guarantee recovery. For the process, see business debt collection and unpaid invoices.
How should you claim late payment compensation in practice?
- Confirm the invoice is legally late on a qualifying B2B contract.
- Calculate statutory interest from the day after the relevant day, using the correct Bank Rate snapshot for the half-year.
- Add the correct fixed sum (£40, £70 or £100) for that overdue payment.
- Write those figures into a clear demand — preferably a letter before action that states principal, interest, and compensation separately.
- Keep evidence : contract or terms, invoice, delivery proof, chase trail, and your interest calculation.
A knowingly false statement in a pre-action letter can be treated as contempt of court. Do not inflate the band, invent recovery costs, or claim compensation on a consumer debt through this portal.
If reminders have stalled and the debt is not genuinely disputed, upload the invoice. A specialist partner is assigned. You remain the creditor. Fees are usually a fixed percentage of recovered sums, agreed before they start. Recovery is not guaranteed.
Frequently asked questions
How much late payment compensation can I claim on a commercial invoice?
On a qualifying overdue B2B debt under section 5A: £40 under £1,000, £70 from £1,000 to £9,999.99, and £100 at £10,000 or more, once per overdue payment, on top of statutory interest where due.
Is the £40 / £70 / £100 instead of interest?
No. GOV.UK and section 5A treat the fixed sum as additional to statutory interest once interest has begun to run.
Can I claim compensation on every unpaid invoice?
Only where the 1998 Act applies and the payment is legally late. Consumer invoices, employment arrangements, and contracts outside the Act do not attract these bands through this route.
Can I add agency commission on top of the fixed sum?
Section 5A(2A) allows a claim for reasonable recovery costs not met by the fixed sum. Whether a particular commission qualifies is fact-specific. Never invent costs in a demand letter.
Does claiming compensation guarantee I will be paid?
No. Compensation and interest improve what you can claim on paper. They do not force the debtor to pay. Court or enforcement is a separate step if chasing fails.
Who collects the invoice if I instruct Debt Collection UK?
We introduce your B2B file to an independent partner agency. We are not solicitors and we are not FCA-authorised. Partners usually work on a fixed percentage / commission agreed before they act. Recovery is not guaranteed.
This guide is free. Instructing a partner to recover an overdue commercial invoice is not: fees are usually a fixed percentage of what they recover (often no-collection, no-fee), agreed before they start. For the statutory bands on your own money pages, see late payment compensation. When chasing has stalled, pass the file via unpaid invoices or business debt collection.