Late payers face bigger interest penalty

Small businesses have won an important victory in their battle against late payment by convincing the Government to allow them to charge an interest rate of 8 per cent over base rate on unpaid invoices. According to industry sources, the interest rate will be specified in the Government's late payment bill, which will be introduced to Parliament later this week. The Government had originally suggested a rate of 4 per cent over base rate.

Small businesses argued a statutory right to interest should be set sufficiently high to provide an effective deterrent for late payers. To avoid abuse by large companies, the legislation will initially only apply to small businesses pursuing claims from larger firms. After two years, it will be extended to small firms claiming from each other, before being made universal after a further two years.