Late Payment

Late Payment

Directive 2011/7/EU on Combating Late Payment in Commercial Transactions

The Directive covers all debts incurred in commercial transactions. It applies to businesses and public authorities, whether the transactions are within the UK or across EU borders.

The Directive extends existing laws and practices currently enjoyed by British businesses across the Union, creating a level playing field for UK businesses trading with other businesses and public authorities in all Member States.

The main points outlined in the EU Directive are that:

  • public authorities will be required to pay suppliers within 30 calendar days of receipt of an undisputed invoice (this matches the UK Government’s standard practice for the public sector)
  • for business to business payments, the period for payment fixed in the contract should not exceed 60 days, unless otherwise expressly agreed and provided such terms are not grossly unfair
  • it copies current UK practice of a default payment period of 30 days, where terms have not been agreed
  • there is a minimum €40 for compensation (current UK legislation sets three levels of compensation payment according to the value of the payment). Suppliers will not be prevented from seeking to claim additional recovery costs.

The UK was one of the first countries to introduce late payment legislation.

The United Kingdom amended late payment legislation comes into force on 16 March 2013, implementing European Directive 2011/7/EU on combating late payment in commercial transactions. The UK amended legislation made pursuing payment a simpler process across the European Union, reducing the culture of paying late and making paying on time the norm.

Under the new rules, debtors will be forced to pay interest and reimburse the reasonable recovery costs of the creditor, if they do not pay for goods and services on time (60 days for business and 30 days for public authorities).

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