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Can our terms and conditions include penalties for late payment?

If you are selling to business customers, you are entitled to claim interest and debt recovery costs for late payments. Normally late payment interest starts to apply after 30 days, or up to 60 days if agreed in your terms and conditions.

You can agree a reasonable rate of interest and level of costs between yourselves when you negotiate the contract. But if you haven’t done this, a standard rate of interest applies (eight percent above the Bank of England base rate). In these circumstances, you can also claim a fixed fee of £40—£100, depending on the amount of the debt, plus reasonable recovery costs.

These rules don’t apply if you are selling to consumers rather than business customers. Offering credit to consumers (other than accepting credit card payments) is regulated and requires a licence, so you should take legal advice if this something you do.

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