Late interest charge format?

[mookle]

Apologies if this has been covered before; I have searched but didn't find what I was looking for.

After some pestering an old client of mine eventually paid an overdue invoice, but their delays put me in a tricky financial position so I've decided to exercise my right to charge interest on the late payment. The issue isn't that they won't pay, but that they refuse to pay unless I issue them an invoice. My questions are:

1) Can they do this? I thought a notice of payment (which I have already issued) was all that was required.
2) Is there any real distinction between me issuing an invoice and a simple notice of payment? I.e. Surely I can classify either as "interest received" from an accounting perspective?
3) Should I just issue an "interest-only" (no VAT) invoice and stop worrying, before they change their minds?!

Many thanks,
Mat

[northernladuk]

How much are you actually charging for the interest part? Is it a sizeable amount or is it something you could swallow and just be happy you got your money?

What did your accountant say?

[mookle]

Hi northernlad,

It's a small amount (sub £100) that I could easily absorb, but the question isn't whether to forgo the payment or not, it's whether to insist that the "notice of payment" was enough, or to agree to issuing an invoice for the interest...

[I just need to test it]

I used this to calculate the amount

Late Payment Calculator - Calculate interest on overdue invoices

and this for the format

Contractor late payment letters - free templates l debt recovery example and sample letter :: Contractor UK

[mookle]

I used this to calculate the amount

Late Payment Calculator - Calculate interest on overdue invoices

and this for the format

Contractor late payment letters - free templates l debt recovery example and sample letter :: Contractor UK

Hi, I used a very similar template to make the initial request, but that's exactly what the client is arguing about: They don't think that template is enough and to comply with HMRC guidance (see the bottom of this page: https://www.gov.uk/late-commercial-p...ommercial-debt) I have to issue them with an invoice too.

So the question is; do I give in and just issue an invoice or insist that an invoice is not needed?

[Contreras]

Hi, I used a very similar template to make the initial request, but that's exactly what the client is arguing about: They don't think that template is enough and to comply with HMRC guidance (see the bottom of this page: https://www.gov.uk/late-commercial-p...ommercial-debt) I have to issue them with an invoice too.

So the question is; do I give in and just issue an invoice or insist that an invoice is not needed?

Let me get this right:
- the client is asking for an invoice for the interest and charges
- the gov website says "Send a new invoice if you decide to add interest to the money you’re owed."



I know what I would do.

[mookle]

Let me get this right:
- the client is asking for an invoice for the interest and charges
- the gov website says "Send a new invoice if you decide to add interest to the money you’re owed."



I know what I would do.

Fair point, but:

- EVERY other source I have come across says simply provide a written notice. Several even explicitly state not to invoice. I assume it's because 1) invoices aren't required documents in the first place (see below) and 2) it could generate a stupid cascade (i.e. what happens if my invoice for interest isn't paid on time; an invoice for interest on the interest invoice from the original invoice?! )
- I'm not VAT registered, so I'm under no obligation to provide an invoice at any point, for anything (https://www.gov.uk/invoicing-and-tak...omers/overview).

Not arguing here, just talking it through to understand what's "right"

[Contreras]

Fair point, but:

- EVERY other source I have come across says simply provide a written notice. Several even explicitly state not to invoice. I assume it's because 1) invoices aren't required documents in the first place (see below) and 2) it could generate a stupid cascade (i.e. what happens if my invoice for interest isn't paid on time; an invoice for interest on the interest invoice from the original invoice?! )
- I'm not VAT registered, so I'm under no obligation to provide an invoice at any point, for anything (https://www.gov.uk/invoicing-and-tak...omers/overview).

Not arguing here, just talking it through to understand what's "right"

Interest is charged only on the capital debt. You can't charge interest on interest.

What's "right" is applying some common sense and pragmatism. In this case that means complying with the client request. Only reason not to do so would be if it fell foul of the law or if it afforded them more wriggle room than they had already.

[mookle]

Interest is charged only on the capital debt. You can't charge interest on interest.

What's "right" is applying some common sense and pragmatism. In this case that means complying with the client request. Only reason not to do so would be if it fell foul of the law or if it afforded them more wriggle room than they had already.

I get where you're coming from; it's one of those times where being correct isn't the same as being right...

Thanks for the advice

[Safe Collections]

I get where you're coming from; it's one of those times where being correct isn't the same as being right...

Thanks for the advice

Precisely

You shouldn't need to send an invoice, but many firms wont pay without one. Just remember VAT is not applicable to late payment fixed costs and interest