![]() ![]() ![]() Let’s say the client has not paid by 29th June, which is 30 days after the debt should have been paid. Failure to do so means the contractor can start charging interest from 31st May. The contractor invoiced their client for this sum on 1st May with 30 day terms, meaning the client must pay them £1,000 by or on 30th May. Say a contractor is owed £851.06 plus VAT of £148.94 for their fee, which makes the nice round sum of £1,000. If you’d like an example, though, here you are: It all sounds rather complicated, but don’t worry, Contractor Calculator’s late-payment calculator will do the hard work for you. Interest is charged on the gross amount of the debt including VAT, but VAT is not charged on the interest. The interest calculated is simple, not compound, according to the following:ĭebt x interest rate x (the number of days late/365) = interest So, using the example above, if the invoice was dated the first of the month and the terms are 30 days, then the contractor can start charging interest from the 31st day, which could be the 31st of that month or the first of the next.įrom the point that the payment on the invoice becomes due, the interest will start to accrue on the principal debt owed to the contractor by their client or agency, based on a formula of the ‘reference rate’ of the Bank of England plus 8%. Interest can be charged on an overdue payment from the day after the last day that it should have been paid. ![]() ![]() When a contractor enters into a contract with their client or agency, one of the key clauses in the contract will be the payment terms Some client’s and agency’s finance departments will try and flannel contractors by saying it’s ‘30 working days’, but according to the law there is no doubt – 30 calendar days it is. This means that if the contractor sends an invoice dated the first of the month, the payment should be expected to arrive by the 30th day of that month. The law says that, in the absence of agreed terms between the supplier, ie the contractor, and their customer, ie the client or agent, the payment terms are assumed to be 30 days from invoice. Most, however, expect to be paid within seven days of invoice if they are a ‘weekly’ contractor, or within 30 days of invoice if they are a ‘monthly’ contractor. In some rare cases, it will state how many days after performing the service or getting a signed timesheet the client or agent must pay.īecause contractors come in all shapes and sizes, so do their payment terms. Typically, the contract will specify after how many days from the date of invoicing the payment should be made. When a contractor enters into a contract with their client or agency, one of the key clauses in the contract will be the payment terms. The Late Payment of Commercial Debts (Interest) Act 1998, and amendments in 2000, 20, mean that contractors have a statutory right to claim interest from their clients or agents who don’t pay bills on time.īut how is interest calculated? When is a payment deemed to be late? And when should interest be charged? Contractor Calculator’s late payment interest calculator, in conjunction with this guide, can work out how much contractors should charge and when. The right of any business, including contractor limited companies, to claim interest on unpaid bills from customers and clients is enshrined in UK and European law. ![]()
0 Comments
Leave a Reply. |