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XLP Debt Recovery Service, part of XLP Accounting Limited


We provide professional debt collection services at competitive rates.

Having run several businesses ourselves, we understand how frustrating and time-consuming it can be to recover debt from clients who are delaying payment either intentionally or unintentionally.

XLP Debt Collection service is here to help you recover debt quickly and easily from payees. We will work with you, answer all your questions, keep you fully informed of progress and ensure the optimum outcome for your business.

What’s the legal process for getting my customer to pay up?

Late payment demand or letter before action

The first step is to send the customer a late payment demand or letter before action. This is a formal letter which gives the customer warning that if they don’t pay by a certain date (minimum 7 days’ notice, from date of letter & email) you will take legal action. It needs to detail the outstanding amount, and any interest and compensation costs you’re charging. Many customers will pay you at this point.

Court proceedings

If the customer doesn’t pay up, the next step is to start court proceedings against them. In England and Wales, debts of up to £10,000.00 are dealt with as small claims in the county court. Claims of £10,000.01 – £25,000.00 are generally also dealt with in the same way. Claims of over £25,000.01 are dealt with in the High Court. You need to pay a court fee to start proceedings.

Court hearing

If the court decides that a hearing does need to take place (standard if the amount is more than £10,000) you will need to pay some extra fees. For small claims hearings, you do not need a solicitor, but it is advisable to use one for larger claims, as a solicitor will aid in retrieving all costs including solicitors’ fees. If the court finds in your favour, the court will award a judgment ordering the customer to pay up. For small claims this will be a county court judgment (CCJ). If the customer doesn’t pay within approximately one month, the judgment gets registered against them, and remains in place for six years. This will affect their ability to gain credit.


Courts are keen for disputes to be settled without a hearing. For claims of less than £10,000 courts encourage you to use their mediation service. If you’re able to settle before a hearing you may get back some of your fees. A judge might not award you costs if they think you’ve made little or no effort to come to an agreement out of court.

Can I Claim Interest on an Overdue Invoice?

Interest and Compensation on Late Payments

The UK has had late payment legislation since 1998 that created a statutory right for suppliers to charge interest on overdue invoices. The original legislation applied to debts owed by large firms and the public sector, but in 2002 the right was extended to debts owed by small companies too.

In addition to charging interest, a late payment fee was introduced towards the costs of recovery of the debt. The fee was fixed depending on the size of the outstanding debt to be collected.

In 2013 the rules were updated. As well as forcing the debtor to pay interest and the fixed fee, the supplier can also get back their “reasonable” recovery costs from the late payer. This development opens up the opportunity to use a debt collection service to recover the debt and add the fee to the amount the debtor needs to pay you so if they pay the whole amount, you effectively get the service for free.

The statutory right to claim interest and compensation is not compulsory and it is for the supplier to decide whether or not to make use of the rights.

How is Late Payment Interest Calculated?

If you’re using our online debt collection service to collect an overdue invoice then you will be given the option to add interest and fees to the amount and the system will automatically calculate the amounts for each invoice.

Simple (not compound) interest is calculated at the rate of 8% above a reference rate based on the Bank of England base rate. The reference rate is set each six months for the following six months as the base rate on 31 December and 30 June.  You choose your reference rate based on the six-month period in which the invoice became due.

What Compensation Fees can be Applied?

In addition to charging interest on late payments, the supplier can charge the debtor for costs associated with recovering the overdue debt. This is made up of two parts, first a fixed compensation charge as follows.

Value of Unpaid Debt

Compensation Charge

Value of Unpaid Debt: Up to £999.99
Compensation Charge: £40

Value of Unpaid Debt: £1,000 to £9,999.99
Compensation Charge: £70

Value of Unpaid Debt: £10,000 or more
Compensation Charge: £100

Second, you can claim compensation for “reasonable costs” associated with recovering the late payment that exceed the fixed sum. This could include, for example, fees for a debt collection agency service so you can appoint professionals to spend their time chasing the overdue invoice at no cost to you.

Should I Charge for Compensation on a Late Payment?

Just because you have the right to apply compensation charges and interest doesn’t mean that you always should.  Charging interest and compensation is optional and may not always be the right choice.

You may have a long-term trading relationship with your customer and decide it’s better to maintain good relations for the future.

It’s not always clear-cut that the fault lies only with your debtor.  For example, debtors often claim that they never received the invoice or may have raised a query on the invoice that they feel wasn’t resolved.

Finally, adding compensation charges could just delay your payment further or reinforce opposing positions.  Most businesses just want their invoice settled quickly and with minimum fuss so they can move on.  Ending up in court adds upfront costs with the risk you may not win this back.

XLP Debt Recovery Service, part of XLP Accounting Limited approach is to add interest and compensation payments (including our success fee) to the debt to be collected from the outset unless instructed otherwise by the client. However, we recognise that many clients just want the matter settled quickly and with minimum risk, and the option to waive the compensation can be a useful lever to bring things to a swift resolution.