Late payment rule changes
THE FREELANCE recently passed a thundery afternoon catching up on The Late Payment of Commercial Debts Regulations 2013, so you don't have to. Our head hurts. As solicitors Michelmores put it: "In the UK, the main effect has been to make the position less clear and the legal wording more convolute."
They make some important changes to the existing legislation, affecting contracts made (agreed) after 16 March 2013.
- You can now claim your actual costs for recovering money from a client that pays late. The minimum amount of compensation you can claim remains set at £40 for debts up to £1000, £70 up to £10,000 and £100 thereafter. These amounts are on top of the penalty interest you can charge, which remains at 8 per cent over Bank of England base rate. If it costs you more than the relevant minimum amount to claim the debt, you can now claim all costs.
- Your clients now have the option of specifying in their contract with you a "procedure of acceptance or verification" of the work you supply, to be completed not more than 30 days from the date on which the work is delivered. They can ask you to agree a longer period, but this must not be "grossly unfair".
- The payment clock starts ticking when you invoice; or when you deliver the work; or when this "procedure of acceptance or verification" is completed - whichever is the later.
- Unless agreed otherwise, payment is due 30 days after that clock starts ticking.
- Your private-sector (non-governmental) clients may now ask you to agree to be paid up to 60 days after the clock starts ticking. They can in fact ask you to agree an even longer period, but this too must not be "grossly unfair".
- For all public-sector clients in the UK, the payment is due after 30 days.
Please let us know at firstname.lastname@example.org if you sight one of these "procedures of acceptance or verification".
In hindsight, the Freelance feels Her Majesty's Government pulled a bit of a fast one when consulting on these changes, by failing to ask any questions about the "verification" period.
But then a "procedure of acceptance" cannot logically extend beyond publication or broadcast, as the Freelance sees it. So it seems that this measure legitimises the "pay 30 days after publication" procedure - for those clients that publish within 30 days of receipt of the work.
And it effectively sets a 30-day limit on how long a publisher or broadcaster can sit on your work before deciding whether they will use it. The Freelance's record so far is 10 months, and the interviewee sadly died the week after publication.
Brighter news for those who sell into joined-up Europe is that minimum compensation of €40 now applies in all EU member states, on top of penalty interest. The latter has been increased in most, and is now everywhere 8 per cent over European Central Bank base rate in the Eurozone.