The Late Payment of Commercial Debts (Interest) Act 1998 (Transitional Provisions) Regulations 1998

Explanatory Note

(This note is not part of the Regulations)

The Late Payment of Commercial Debts (Interest) Act 1998 (“the Act”) provides for the payment of interest on the late payment of commercial debts in respect of the supply of goods or services.

The Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998 (S.I. 1998/2479 (C. 56)), which comes into force on the same date as these Regulations) provides for the Act to come into force in respect of debts due to suppliers which are small businesses owed by purchasers who are either large businesses or United Kingdom public authorities. These terms are defined in that Order.

These Regulations provide (regulation 2(2)) that in any proceedings it shall be presumed, unless the contrary is proved, that the business of the purchaser is a large business. The term “purchaser” is defined in section 14(1) of the Act. To displace this presumption, the purchaser would have to prove, on balance of probability, that it was a small business.

Where on a claim for interest any dispute arises about the size of the supplier, it will be for the supplier to prove that it is a small business. The rules of procedure and evidence have this effect without modification.

United Kingdom public authorities will be required to pay interest on the late payment of their commercial debts from the coming into force of the commencement order referred to above, but will not be entitled to claim interest until the Act is brought into force for that purpose. The size of such an authority does not affect its rights and liabilities under the Act.

Nothing in these Regulations affects the incidence of the burden of proof in respect of any fact in issue in any proceedings other than the size of the purchaser.

On the same day as these Regulations come into force, the following will also come into force to give full effect to the Act–

(a) the Late Payment of Commercial Debts (Interest) (Legal Aid Exceptions) Order 1998 (S.I. No. 2482), which excepts certain contracts made by the Legal Aid Board for the provision of legal aid where the rates are those provided for under the Legal Aid Act 1988;

(b) the Late Payment of Commercial Debts (Rate of Interest) Order 1998 (S.I. No. 2480), which sets the rate of interest under section 6 of the Act.