All businesses are legally entitled to charge late paying cutomers interest and they are also entitled to claim reasonable debt recovery costs. The amount of interest you can charge is an amount up to 8% over the Bank of England base rate.
If you are considering taking this step, it is probably a good time to review your current credit control procedures. Make sure you have an agreed credit period with all clients - although verbal agreements are acceptable, they are harder to enforce, so it is preferable to have any agreed credit period in writing. In the absence of an agreed credit period, the law provides for a default period of 30 days.
If you do decide to start charging interest on late payments, you need to notify your customers accordingly about this change and this should be done in writing. It is important that all invoices clearly show the due date for payment and that all customers understand your credit terms and when interest may be charged.
To discuss any aspect of record keeping or credit control, please contact your local TaxAssist Accountant who will be happy to help.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.