GP practices have the legal right to charge interest on overdue payments from clients or third parties. This right is outlined in the Late Payment of Commercial Debts (Interest) Act 1998 (LPCA), which establishes clear guidelines for handling late payments.
Under the LPCA, a payment is considered overdue if it is more than 30 days past the due date. The due date can be defined as either the receipt of the invoice or the delivery of the service, whichever is later. Once this 30-day period has passed, the debt is deemed late, and GP practices can begin charging interest.
The interest rate for late payments is calculated at 8% above the Bank of England base rate. This means that, in addition to the original debt, the creditor (the GP practice) is entitled to charge a higher rate of interest, providing some compensation for the delayed payment.
In addition to the interest, the LPCA allows for a fixed sum to be added to the debt. The amount of this fixed sum depends on the value of the debt. The greater the amount of the outstanding debt, the higher the fixed sum that can be levied. This fixed sum acts as a deterrent to late payment and further compensates for the administrative effort involved in chasing up the debt.
For a more detailed explanation of the law and how it applies to businesses like GP practices, you can consult the official government summary here.
By understanding and implementing these rules, GP practices can ensure they are fairly compensated for late payments and help maintain financial stability in their operations.