Fresh legislation will help freelances fight late pay

New guide to payment law

From August, when new legislation comes into force, some freelance journalists will be able to claim interest on late payments and have late payers fined up to £100.

The new rules will apply to freelances who have set up businesses as sole traders and have entered into commercial contracts with newspaper or magazine companies, says the Department of Trade and Industry.

But they will not apply to those on the payroll – on contract or working shifts, for example.

Small business minister Nigel Griffiths has announced a new package of measures to help combat late payment of bills – the freelance’s nightmare.

For the first time all firms, including freelances trading as self-employed businesses, who are owed money will be able to claim up to £100 in debt recovery costs for each overdue bill, on top of claiming interest on the amount owed. Griffiths said: "We are using a European Directive to give positive benefits to millions of UK businesses in three key ways."

Simplifying the calculation of the interest rate for late payment by fix-ing the rate for a six-month period, rather than fluctuating monthly as it does at present.

Allowing representative bodies to challenge in court grossly unfair contractual terms on behalf of small businesses.

Extending the late payment legislation to include businesses of all sizes and the public sector – at present only small firms can claim interest on debt.

Griffiths has also announced the publication of a new guide to help those owed cash benefit from the new legislation, which comes into effect from 7 August. "Customers who fail to pay on time can have a real impact on the survival of the small business they owe money to," he stressed.

"That’s why cashflow problems and the time spent chasing debt are on the list of business owners’ biggest bugbears. This new legislation will ensure that the cash keeps flowing.

"It also means that businesses involved in cross-border transactions with the EU will have greater payment certainty as a result of having access to legislation similar to that available in the UK."

It is estimated that small businesses are owed £17bn from debtors at any one time – £6.8bn of that paid late – while other research has indicated that approximately 10,000 UK businesses fail each year as a consequence of late payment.

Amounts creditors will be able to claim for unpaid debts are: £40 for a debt below £1,000; £70 for a debt worth between £1,000-£9999.99; £100 for a debt of £10,000 and above.

The UK was one of the first countries in the EU to implement late payment legislation to help promote a culture of prompt payment.

To order A User’s Guide to Late Payment Legislation, telephone 0870 150 2500. The guide can also be downloaded from the Better Payment Practice Group website which can be found at www.payontime.co.uk

 

By Jean Morgan

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