When taking on new clients, a question we regularly get asked is, “what fees can I add to the debt?”, or a variation of this question.

This blog will outline the different fees and costs that you can add to the debt, depending on the type of debt it is, and what it states in your terms and conditions.

Business-to-Business Debt

If your business has unpaid invoices which are owed by another business, costs can be added in one way or another.

Debt recovery costs can be added to the debt contractually. This is where it is stated that debt collection costs are to be added in circumstances of late payment in the signed contract you have with the customer, or in your terms and conditions. Interest can also be added to the case if it is stated in your contract/terms. The interest rate must be reasonable – this tends to be anything less than 10%, however the average tends to be between 1-2%.

If your company does not have any terms or a signed contract with the customer, then there is late payment legislation that you can fall back on. Through the Late Payment of Commercial Debts (Interest) Act 1998 companies can added three types of fees to the unpaid balance:

Collection Costs

This piece of legislation allows reasonable costs from debt recovery agencies to be added to the debt.

Interest

At a rate of 8% above the Bank of England base rate, companies can add interest to the debt as long as there is not a different rate of interest in the contract/terms.

Late Payment Charge

Commercial customers can also be charged a fixed sum for the cost of recovering a late payment on top o claiming interest from it. The amount added depends on the debt value; the fee can only be charged once per invoice. See the different fee amounts below:

                DEBT VALUE                                   WHAT CAN BE CHARGED

Up to £999.99 –                            £40

£1,000 to £9,999.99 –                   £70

£10,000 or more –                        £100

We recommend looking at the government website where it has a further breakdown on what fees can be added to a B2B debt. Follow this link.

Business-to-Consumer Debt

The rules for adding fees to B2C debts differ from B2B debts.

Debt recovery costs are not legally enforceable unless it is explicitly stated in the contract with the customer or in the company’s terms. That being said, even if it is not stated in your terms, costs can be added to the debt balance however the debtor is not obliged to pay them if they refuse. It is therefore recommended that a clause is added in your terms/contract which explicitly states that debt recovery costs are payable by the debtor in circumstances of late payment.

Like B2B debts, a reasonable interest rate can also be added into the terms/contract and put on top of the debt balance in instances of late payment. For B2C debts, it must be highlighted in the terms/contract as there is no legislation for to fall back on.

Hopefully this article has been useful in knowing what your options are in adding costs to your debt balance. If you have any questions or queries, and are in need of some debt recovery assistance, please do not hesitate to contact our offices on 01702 466 300, or email sales@scottandmears.co.uk.

If you would like to submit your debt through to us, simply CLICK HERE.

Disclaimer: The information provided in this article represents the opinions and insights of Scott & Mears. It is intended for informational purposes only and should not be considered as professional financial or legal advice. Business owners and individuals seeking financial guidance should consult with qualified professionals to address their specific financial needs and circumstances. Scott & Mears disclaims any liability for decisions made based on the content of this article.

Published: 28/03/25