Here is a chase email that goes wrong before it is even sent. Invoice went overdue in March 2025. The sender looks up the Bank of England base rate today, finds 3.75 percent, adds the statutory eight points, and bills interest at 11.75 percent. Finance queries the calculation instead of paying it. Three more weeks disappear arguing about roughly eleven pounds.
Statutory interest on a late commercial debt does not track the base rate. It gets fixed at the moment the debt goes late and stays fixed until it is paid, however many times the Bank moves in between.
The rule sits in the Late Payment of Commercial Debts (Rate of Interest) (No. 3) Order 2002 and it works in six month blocks. If the debt went late between 1 January and 30 June, you use the base rate in force on the previous 31 December. If it went late between 1 July and 31 December, you use the rate in force on the previous 30 June. Add eight percentage points to whichever one applies. That is your rate for the life of that invoice.
So an invoice that fell overdue in March 2025 sits on a different locked rate to one that fell overdue last week, and if you are chasing a stack of them you have several rates running at once. Most calculators handle this correctly. Most people typing a number into an email do not.
What the skill does
I built it as a recovery ladder rather than a letter template, because the letter is the easy part. It takes the invoices, works out the real due date, locks the correct rate to each one, adds the fixed compensation, then decides how hard to push and how fast.
The catch it exists to prevent is a different one though, and it is the more expensive of the two. Before you send anything resembling a letter before action, you have to know whether the debtor is a limited company or a sole trader, because the answer changes the rules you are bound by. The Pre-Action Protocol for Debt Claims covers individuals, and the definition of an individual includes sole traders. It does not cover limited companies. If your debtor is a sole trader, the letter of claim has to carry an information sheet, a reply form and a financial statement, and you have to wait 30 days from the date on the letter before you issue. Against a limited company, none of that applies and 14 days is usually reasonable.
Issue early against a sole trader and you can pick up a costs sanction on a claim you would otherwise have won. Nothing about the debt changed. You just filed it wrong.
The numbers, as they stand in August 2026
The base rate is 3.75 percent. The Monetary Policy Committee held it there on 30 July 2026 and the next decision is 17 September. Because the rate on 30 June 2026 was also 3.75 percent, statutory interest for any commercial debt that went late between 1 July and 31 December 2026 is 11.75 percent. Simple interest, not compound. Daily amount is the debt including VAT, times the rate, divided by 365.
On top of interest each invoice carries a fixed sum, once, under section 5A of the Late Payment of Commercial Debts (Interest) Act 1998. Debts under 1,000 pounds carry 40 pounds. Debts from 1,000 to 9,999.99 pounds carry 70 pounds. Debts of 10,000 pounds and over carry 100 pounds. If your reasonable recovery costs come to more than the fixed sum, you can claim the excess instead, provided you itemise it.
The part almost nobody uses: both interest and compensation can be claimed on invoices that were paid, but paid late, going back six years. If you have a client with a five year habit of paying at day 75 on 30 day terms, there is a real number sitting in your old invoices. Whether you want to detonate the relationship to collect it is a separate question.
Where no payment terms were ever written down, the default is 30 days, counted from the later of the day you performed or the day the customer was told what they owed. Public authorities are capped at 30 days and cannot agree their way out of it. For business to business, an agreed period longer than 60 days only holds if it is not grossly unfair to the supplier.
Then there is the bit everyone skips, which is free and takes about four minutes. Large companies have to publish their payment performance twice a financial year at check-payment-practices.service.gov.uk, and the reports show average days to pay and the proportion paid outside agreed terms. The qualifying tests, met on the last two balance sheet dates, are turnover of 54 million pounds or more, balance sheet total of 27 million pounds or more, or 250 or more employees, and any two of those three trigger the duty. Thresholds went up for financial years beginning on or after 6 April 2025. From January 2025 the monetary value of late payments has to be disclosed rather than just percentages, and from 1 January 2026 the breakdown also goes into the audited directors report, split at 30 days, 60 days and 61 days or more.
Separately there is the Fair Payment Code, which replaced the Prompt Payment Code on 3 December 2024. Gold means at least 95 percent of invoices paid within 30 days. Silver means 95 percent within 60 days plus 95 percent of small business invoices within 30 days. Bronze means 95 percent within 60 days. Awards run two years and there is a complaints route attached. If your debtor holds an award and is nowhere near its standard on your invoice, saying so politely in an email to a named director tends to work better than another reminder to accounts payable.
On the court step, issue fees run on claim value and Money Claim Online takes 10 percent off the standard issue fee. Claims up to 10,000 pounds normally land on the small claims track, where you will not recover your legal costs even if you win. Check the current fee table before you quote it, because these change.
The skill
Save this as SKILL.md, or paste it into a project, a custom GPT or a Claude project as instructions. It will ask you for the invoice facts before it calculates anything.
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name: late-invoice-recovery-ladder
description: Turns an overdue invoice into a costed, legally grounded recovery plan for a UK sole trader or small business. Works out the correct due date, locks the right statutory interest rate to the period the invoice went late, adds the fixed compensation, checks the debtor's own published payment record, picks the correct pre-action route for the debtor's legal form, and drafts the chase sequence with dates. Use when a client has not paid, when an invoice is weeks overdue, when deciding whether to add interest, when writing a chase email or a letter before action, or when working out whether going to court is worth the fee. Trigger phrases include "client has not paid", "invoice is overdue", "chase a late payment", "can I charge interest on a late invoice", "how much interest can I add", "letter before action", "small claims for unpaid invoice", "customer keeps stalling on payment", "should I take them to court over an invoice".
---
This is not legal advice and it is not tax advice. It applies to England and Wales only. Scotland and Northern Ireland have different court routes and time limits. Before you send anything that threatens court, have it read by a solicitor or an accredited debt recovery firm. Everything this skill produces must show its working so a professional can check it in two minutes.
The single most common error is using today's Bank of England base rate. Statutory interest is locked to the base rate in force on a fixed reference date and stays locked for the life of that debt. Get that wrong and the debtor's finance team will use it to reject the whole claim.
## Step 1: Build the invoice table
Ask for, or extract from the documents provided, one row per invoice:
- Invoice number and date
- Net amount and VAT amount
- Date the work was completed or goods delivered
- Date the invoice was actually received by the customer, if known
- Agreed payment terms, quoted from the contract, purchase order or your terms and conditions
- Date paid, if it was eventually paid
- Whether the customer is disputing the work, and what they have said in writing
If payment terms are not written down anywhere, say so explicitly in the output. It changes the calculation.
## Step 2: Fix the due date
Apply in this order:
1. If a payment date was agreed in writing, interest runs from the day after that date.
2. If no date was agreed, the default is 30 days, counted from the later of: the day the supplier performed, or the day the customer was notified of the amount due. Interest runs from the end of that 30 day period.
3. If the customer is a public authority, the payment period is capped at 30 days and cannot be extended by agreement.
4. If the customer is a business and the agreed period is longer than 60 days, flag it. A period over 60 days is only enforceable if it is not grossly unfair to the supplier.
State which of these four applied and why.
## Step 3: Check whether the contract displaces statutory interest
Read the contract or terms for a late payment clause. A contract term that excludes the statutory right to interest is void unless the contract provides a substantial remedy of its own. To count as substantial it has to both compensate the supplier properly and deter late payment. A token rate such as 1 percent a year will not survive that test.
Output one of three findings: statutory interest applies, the contract rate applies and is higher, or the contract rate looks too weak to displace the statute and should be reviewed. Never apply both a contract rate and statutory interest to the same debt.
## Step 4: Pick the rate and lock it
Statutory interest is the Bank of England base rate plus 8 percentage points. The base rate used is not today's rate. It is the rate in force on the reference date for the six month window in which the debt became late:
- Debt became late between 1 January and 30 June: use the base rate in force on the preceding 31 December.
- Debt became late between 1 July and 31 December: use the base rate in force on the preceding 30 June.
That rate stays fixed until the debt is paid, however many times the Bank moves in the meantime.
Look up the base rate for the relevant reference date before calculating. Do not write it from memory. As at August 2026 the base rate is 3.75 percent, held at the 30 July 2026 meeting, which makes the statutory rate 11.75 percent for debts that became late between 1 July and 31 December 2026. Older invoices will sit on a different locked rate and each one has to be checked separately.
Interest is simple, not compound. The daily amount is:
daily interest = debt including VAT x annual rate / 365
Show the daily figure and the running total per invoice, with the day count.
## Step 5: Add the fixed compensation
On top of interest, each qualifying invoice carries a fixed sum, once per invoice:
- Debt under 1,000 pounds: 40 pounds
- Debt from 1,000 to 9,999.99 pounds: 70 pounds
- Debt of 10,000 pounds or more: 100 pounds
If the reasonable cost of recovering the debt exceeds the fixed sum, you can claim the excess instead of only the fixed sum. Itemise those costs if you claim them.
Both interest and compensation can be claimed on invoices that were paid, but paid late, going back up to six years. Total the retrospective entitlement separately and say so plainly, because most people do not know it exists.
## Step 6: Look up the debtor before you write
This step is what makes the letter land. Two public checks, both free:
1. The payment practices register at check-payment-practices.service.gov.uk. Companies meeting two of three tests on their last two balance sheet dates must publish their payment performance twice a financial year: turnover of 54 million pounds or more, balance sheet total of 27 million pounds or more, or 250 or more employees. Thresholds rose for financial years starting on or after 6 April 2025. From 1 January 2026 large companies also have to put a payment breakdown into the audited directors report, split into 30 days, 60 days and 61 days or more. The report shows average days to pay and the proportion paid outside agreed terms.
2. The Fair Payment Code awardees directory at smallbusinesscommissioner.gov.uk. The Code launched on 3 December 2024, replacing the Prompt Payment Code. Gold means at least 95 percent of invoices paid within 30 days, Silver means at least 95 percent within 60 days and at least 95 percent of small business invoices within 30 days, Bronze means at least 95 percent within 60 days. Awards run two years and the Code has a complaints route.
If the debtor publishes figures, quote their own number back at them in the letter. If they hold an award and are outside its standard on your invoice, name the award and the standard. If they publish nothing and are below the threshold, say so and drop this line.
Check Companies House for the correct legal name, company number and registered office, and for any insolvency filings. An overdue confirmation statement or a gazette notice changes the urgency.
## Step 7: Identify the debtor's legal form, because it picks the route
- Debtor is an individual or a sole trader: the Pre-Action Protocol for Debt Claims applies. The letter of claim must include the amount, whether it will rise with interest or charges, details of the agreement, your contact details, how to pay, and the prescribed information sheet, reply form and financial statement. You must allow 30 days from the date of the letter before issuing.
- Debtor is a limited company or LLP: that Protocol does not apply. The general Practice Direction on Pre-Action Conduct does, and a reasonable period is usually 14 days.
Getting this wrong is the most common own goal. Issuing early against a sole trader risks a costs sanction.
## Step 8: Build the ladder with real dates
Produce a dated sequence from today, with the owner and the channel for each rung. A workable default for a debtor who has gone quiet:
1. Day 0. Statement of account by email, no accusation, attaching every unpaid invoice and a single total. Ask one question: is there anything blocking payment.
2. Day 3. Phone the person who signs off, not accounts payable, and follow up the same day in writing with what was agreed.
3. Day 7. Formal notice that statutory interest and compensation are being applied from the original due date, with the calculation attached.
4. Day 14. Escalation to a named director, referencing their published payment record if Step 6 found one.
5. Day 21. Letter before action, with the correct wait period from Step 7 stated inside it.
6. After the wait expires. Decide between issuing a claim, instructing a recovery firm, or writing it off.
Move faster where there is insolvency risk. Move slower where the relationship is worth more than the invoice, and say which one you assumed.
## Step 9: Draft the letters
Write each rung in plain English, under 200 words, with the number, the due date, the days overdue and the exact amount now claimed. No threats, no capital letters, no invented legal jargon. Every claim of interest carries its own calculation. Every escalation restates the simplest possible next action for the debtor.
## Step 10: Cost the court step honestly
If it goes to a claim, issue fees in England and Wales are charged on the claim value and Money Claim Online applies a 10 percent discount on the standard issue fee. Verify the current fee table before quoting it, as fees change. Claims up to 10,000 pounds are normally allocated to the small claims track, where recoverable costs are very limited, so legal fees usually will not come back even if you win.
Set out three numbers: total claimed including interest and compensation, the issue fee, and a realistic recovery probability given what Step 6 and Companies House showed. A judgment against a company with no assets is worth nothing.
## What this skill refuses or flags
- It will not draft anything implying criminal consequences, bailiff attendance before judgment, or credit blacklisting. Those statements are false at this stage and undermine the claim.
- It will not apply a contractual interest rate and statutory interest to the same debt, or the fixed compensation more than once per invoice.
- It will not proceed on a base rate taken from memory. If the reference date rate cannot be verified, it stops and says so.
- It flags, rather than argues past, a genuine dispute about the work. If the customer has raised a quality or scope objection in writing, that goes to the top of the output, because interest on a disputed debt is a weaker claim and the dispute should be resolved or documented first.
- It flags any signal of debtor insolvency and recommends professional advice immediately, since chasing can be pointless or, after certain events, improper.
- It flags where the debtor is an individual consumer rather than a business, because the Late Payment of Commercial Debts (Interest) Act 1998 covers business to business and business to public sector debts, not consumer debts.
- It will not produce anything that reads as harassment: repeated contact outside business hours, contact with the debtor's own customers, or pressure on people who are not party to the debt.
- Amounts recovered as interest and compensation are income of the business and need to go to your accountant. This skill does not do the tax treatment.
Where this runs out
England and Wales only. Scotland and Northern Ireland have different routes and different time limits, and the skill will happily calculate interest that is right in Manchester and wrong in Glasgow if you do not tell it.
It also cannot tell you whether the debt is good. A judgment against a company with nothing in it is a piece of paper you paid a fee for. And if the client has raised a genuine complaint about the work in writing, interest is the wrong fight to pick first, which is why the skill pushes any written dispute to the top of its output instead of calculating past it.
None of this is legal advice. Anything that threatens court should be read by a solicitor or a recovery firm before it goes out. The reason the skill is built to show its working line by line is so that checking it takes someone two minutes rather than an hour.
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