Everything concerning late payments falls under the 1998 Act of The Late Payment of Commercial Debts.
This came into force in November of that year, and since then, it has been slightly amended to fall into the European Directive, although it remains the same.
One essential point about this law is that it applies to commercial debt, although it is not exclusive to Limited Companies. Sole traders, freelancers, and other entrepreneurs can use the law.
This law has two primary purposes; the first is to compensate the creditors for any late payments of debts, and the second is to deter any late payments.
It applies to commercially supplied goods and services only, where the terms and conditions do not have an interest provision.
So, in brief, the law states that invoices that are not paid on time entitle the business owner to claim interest compensation
Additionally, if the invoice was placed after 16th March 2013, you can also claim reasonable costs for collecting the debt.
Interest, in this case, can be claimed at a rate of 8% above the Bank of England’s base lending rate, plus a compensation rate of between £40 and £100 for each invoice.