Unpaid Invoices

B2B And B2C

Where both parties are businesses, the Late Payment of Commercial Debts (Interest) Act 1998 implies a right to statutory interest and fixed compensation into the contract automatically, whether or not the contract mentions it. Where the debtor is a consumer, the 1998 Act does not apply; a claimant instead relies on the contract's own payment terms and, if the claim reaches judgment, on interest awarded at the court's discretion under section 69 of the County Courts Act 1984, currently set at 8%.

The claim is evidenced by the invoice itself, the underlying contract, quote, or order confirming the work or goods and the agreed price, proof of delivery or completion, and correspondence chasing payment. Debtors commonly respond by disputing the quality of the goods or work and asserting a right of set-off, disputing the amount invoiced, denying the invoice was received, or denying that the claimed payment terms were agreed.

Late Payment Interest

On a qualifying B2B debt, statutory interest runs at 8% above the Bank of England base rate — currently 3.75%, giving a combined rate of 11.75% a year, calculated daily on the outstanding sum from the day after payment was due. A fixed compensation sum applies per invoice in addition to interest: £40 for debts under £1,000, £70 for debts of £1,000 to £9,999.99, and £100 for debts of £10,000 or more. Where actual recovery costs exceed the fixed sum, the excess can be claimed separately if evidenced. A contract term can displace the statutory rate only if it provides a substantial alternative remedy for late payment; otherwise the statutory terms apply regardless of what the contract says.

Statutory Demand Vs Court Claim

A statutory demand is a formal 21-day payment demand made under the Insolvency Act 1986. It is available for undisputed debts of £750 or more against a company, or £5,000 or more against an individual, and its purpose is to found a winding-up or bankruptcy petition — it does not itself produce a money judgment. Using it on a disputed debt exposes the creditor to a costs order if the debtor applies to set it aside. A court claim, by contrast, produces an enforceable county court judgment and is the correct route where the debt is disputed, falls below the statutory demand thresholds, or where the creditor wants judgment rather than insolvency pressure as the outcome.

When To Escalate

Move from chasing to filing once: the agreed payment date has passed and reminders have gone unanswered, a payment promise has been made and broken, or there are signs the debtor's financial position is deteriorating — in which case earlier action improves the prospects of recovery. Judgments for unpaid invoices track the invoiced sum plus statutory interest and compensation; on the small claims track this typically means awards from a few hundred pounds up to the £10,000 limit, calculated as set out above.