How does the Bank of England interest rates effect you?
The Bank of England raised interest rates on 2nd November 2017 from 0.25% to 0.5%.
This will effect you in 2 ways:-
- On business loans you may be paying a slightly higher rate of interest
However……. The Good News Is-
- When seeking to recover your debts for you we can charge your client’s a higher interest rate on unpaid invoices
In 2002 – Legislation provided all businesses the entitlement to:-
- Claim interest for Late Payment
- Claim reasonable Debt recovery costs (unless the supplier has acted unreasonably)
Businesses are entitled to Claim interest and debt recovery costs (unless you are claiming contractual interest rates).
The debt recovery costs you are entitled to claim relate to the size of the debt:-
The interest you can claim on Late Payments is 8% above the Bank of England base rate (i.e it will increase from 8.25% to 8.5%).
The relevant dates for interest rates under the rules for interest is the “reference rate”.
As such the Bank of England base rate on 31st December is the “reference rate” for debts overdue between 1st January and 30th June each year.
The Bank of England base rate on 30th June is the “reference rate” for debts becoming overdue between 1st July and 31st December each year.
On 31st December 2017 we will be updating the Late Payment interest charging rates to 8.5%.
However – you should be asking yourselves…..
“Does my contract make provision for late payment interest and debt recovery costs?”
Often businesses charge a contractual rate of interest, (this must be identified in the Terms of Business) which tends to be a percentage above base rate, this should have been applied for any invoice due after 2nd November 2017.
If you have stipulated a contractual interest rate it is imperative that you also identify you will be charging debt recovery costs or this option will not be available to you.
If you do not have provisions in your contract for these perhaps 2018 is the time to update your Terms and Conditions – (Click on the link to find out how we can help you with this).
Leave things in our Capable Hands