Letter Demanding Late Payment of Debt

This document is a letter demanding late payment of an outstanding debt where both the creditor (the organisation which is owed money) and the debtor (the organisation which owes money) are acting in the course of business. This is often referred to as commercial debt. The letter may be used where the business which owes the money is a public body, such as a local council. The document is designed for use where the debt has been incurred within the jurisdiction of England and Wales. A different process should be followed where the creditor wishes to issue a statutory demand.

This document can be altered to be a general demand for late payment or a final demand late payment in respect of commercial debt. After a final demand is sent and where the debt remains unpaid, it is possible to send a letter before claim in order to commence the pre-action process in the civil courts. In the cases where debt is owed by an individual to a business, a different type of letter before claim should be used.

A commercial payment will be considered late in accordance with the relevant statutory or contractual provisions (the payment terms). Usually, the terms of payment within an agreement will be 30 days for public authorities or 60 days for other business transactions. Where no agreement has been specified, the period for payment will be 30 days after either:

• the invoice was received by the debtor
• or (if later) the debtor received the relevant goods.

There is an option to include interest payable upon the outstanding debt. The interest charged can be set at any contractual rate or at the statutory rate of 8% plus the relevant Bank of England base rate. If the business sending this letter charges interest under their payment terms, or any contractual terms they have with the debtor, the statutory rate of interest cannot be charged on top of this.

Where the business sending the letter is charging statutory interest, they can also include any late payment compensation costs which will be payable by the debtor and can specify whether the debtor will have to cover any reasonable costs the business has incurred in order to recover the debt.

How to use this document

This document should be sent to the debtor by the business once payment for any services or goods provided has become overdue. The letter can be printed, signed and sent to the debtor via post. It is also acceptable to electronically sign the letter and send it be email.

Where the debtor is:

• an individual the letter should be addressed specifically to that person;

• a private business or public body the letter can be addressed to an individual employee that normally liaises with the business or it can be addressed generally to the business or public body that owes the debt.

The letter should be sent by an employee or person authorised to do so on behalf of the business. It should be signed and dated accordingly and a copy should be kept on record to prove that the debtor has been sent any reminder or final demand before legal action is instigated to recover the debt.

The next steps shall depend upon whether the letter is a general or final demand. Where this letter is

• a general demand for late payment and the debtor does not pay after receiving the letter, the business who has sent the letter can choose to send another letter to the debtor requesting payment and this document will allow the business to do this;

• a final demand for late payment and the debtor does not pay after receiving the letter, the business who has sent the letter can engage with a solicitor to initiate legal action against the debtor to enforce payment of the debt through the courts.

Applicable law

Late Payment of Commercial Debts (Interest) Act 1998

Late Payment of Commercial Debt Regulations 2013

Help from a lawyer

You can choose to consult a lawyer if you need help.

The lawyer can answer your questions or help you through the process. You will be offered this option when you complete the document.

How to modify the template

You fill out a form. The document is created before your eyes as you respond to the questions.

At the end, you receive it in Word and PDF formats. You can modify it and reuse it.