Amendment to Late Payment Regulations

2 minute read
25 April 2013

Within six weeks of its coming into force, the Government has had to amend regulations to correct an anomaly in the Late Payment of Commercial Debts Regulations 2013 (SI 2013/395).

In amending section 4 of the Late Payment of Commercial Debts (Interest) Act 1998, the Regulations introduced a new, more complicated procedure for the calculation of the payment period following which statutory interest would run.

Upon careful consideration of section 4 (as amended by the Regulations), where a contract provides for a procedure for the acceptance of the relevant goods or services, such acceptance procedure can extend for up to 90 days from the date of performance of the relevant obligation.

Additionally, where an acceptance procedure applied, the Regulations allowed for the payment period to be extended by up to 30 further days after completion of the acceptance procedure (or longer upon agreement of the parties provided that it was not grossly unfair to the supplier).

The total result therefore was that, in some cases, a period of 120 days or more could pass before statutory interest would begin to run; a result which effectively rode a coach and horses through the overall intent of the Regulations to encourage shorter payment periods.

As such, the Government has now issued amending regulations (The Late Payment of Commercial Debts (No.2) Regulations 2013) which will have the effect of removing the additional 30-day period following completion of the acceptance procedure.

Therefore, in a contract which provides for a procedure for acceptance, statutory interest will begin to run on the day after the 90th day from the date of performance of the relevant obligation. This is unless the parties have agreed a longer payment date following the acceptance procedure and it is not grossly unfair to the supplier to do so.

The Amending Regulations will come into force in England, Wales and Northern Ireland on 14 May 2013, with similar legislation expected in Scotland on or around that date.

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