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Applying the change in the Bank of England Base Rate from 0.25% to 0.5% to the Late Payment of Commercial Debts (Interest) Act 1998.
Using the Late Payment Act we assist clients recovering debts, the Late Payment Act also allows the addition of reasonable costs in recovering a debt. This means that in the majority of cases this service can effectively be free of charge to the client, with the debtor covering the cost of recovery. The Late Payment Act adds, amongst other charges, interest to the debtor at a rate of 8% plus the Bank of England’s Base Rate.
In a meeting which ended on the 1st November 2017 the Bank of England’s (BoE) Monetary Policy Committee voted to increase the existing Base Rate of 0.25% by a further 0.25 percentage points, to 0.5%
However, until 31st December 2017 the rate of 8.25% still remains applicable to the Late Payment of Commercial Debts (Interest) Act 1988. The new base rate to be applied on debts due between 1st January and 30th June 2018 will then become 8.5% (should the BoE not change the interest base rate again during December 2017). This is due to the Late Payment Act fixing the interest rate for 6 month periods at a time (see table for example)
Where a debt is due across two differing interest periods, then the interest due from the debtor must be calculated using the different rates which were applicable during those periods.
To find out more about calculating and claiming interest and debt recovery costs, if another business is late paying for goods or a service, please visit our Credit Management page here: https://www.sgllp.co.uk/credit-management/services/debt-recovery-service/