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Recouping the Cost of Debt Recovery

Sam Azzopardi-Tudor

Commercial Litigation Blog


It is bad enough when customers do not pay invoices, yet businesses then have to incur costs in pursuing bad-payers.

It is often thought that the costs of recovery action cannot be claimed. True that in most types of legal claim, legal costs cannot be recovered if the claim is resolved before court action becomes necessary; or where court action is started but matter is allocated to the small claims’ track (usually for claims below £10,000 in value).

However, there are special rules that apply to business-to-business debts. Under the Late Payment of Commercial Debts (Interest) Act 1998, a business is entitled to a fixed sum of between £40 and £100 depending on the value of the debt claimed.  If that fixed sum does not cover the actual costs that have been incurred, the business will be entitled to “the reasonable costs of the supplier in recovering the debt”.  This is the case whether or not court proceedings have been started, or if they have been allocated to the small claims track.


This is an under-utilised provision meaning that the reasonable costs incurred by a business collecting in bad debts can be added to the debt, so as not to leave the business out of pocket.


If you would like to speak to somebody about any sort of Litigation, please get in touch with our Commercial Litigation team today on 01952 272222