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How Does the Late Payment Compensation Claim Process Work?

Have you considered seeking recourse for untimely payments from the public sector? Under UK law, your business could be entitled to thousands in compensation. However, many suppliers miss out, not because their entitlement doesn't exist, but because they don't know the process or assume it's too complicated to be worth pursuing.

A 2025 study commissioned by the Department for Business and Trade found that 14,000 UK businesses close every year as a direct result of late payments. That is 38 businesses every single day. Many had a statutory compensation entitlement they never acted on.

Source: Department for Business and Trade / London Economics, July 2025

This article covers what late payment compensation claims are, what you are entitled to, how the process works with LPA, and some practical advice for businesses that supply the public sector.

What Is a Late Payment Compensation Claim?

A late payment compensation claim is a legal right that allows UK businesses to seek compensation for delayed payments from the public sector. The right is established by the Late Payment of Commercial Debts (Interest) Act 1998.

Under the Act, public bodies and contracting authorities must pay undisputed invoices within 30 days. Failure to do so entitles suppliers to compensation. The legislation exists to protect public sector suppliers and hold contracting bodies accountable.

What Are You Entitled to?

Late payment entitlements under the Act break down into three components.

Statutory interest: Calculated daily at 8% above the Bank of England base rate, from the day after the payment deadline to the date payment was received.

Fixed compensation: A set amount per overdue invoice based on its value: £40 for debts under £1,000, £70 for debts between £1,000 and £9,999.99, and £100 for debts of £10,000 or more.

Reasonable recovery costs: Where the fixed compensation does not cover the cost of recovering the payment, additional costs may be claimable.

The total entitlement per invoice can be significant, particularly on larger contracts or where payments were substantially overdue. Critically: the entitlement applies to invoices that have since been paid. If a payment was made late, even years ago, the compensation rights may still be live.

What Counts as a Public Sector Client?

Many businesses are unsure whether their clients qualify. Contracting authorities under the Act include local councils, NHS trusts, central government departments, housing associations, further education colleges, and other bodies governed by public procurement rules. If you have supplied any of these and received payment outside the 30-day period, you may have a claim. LPA's assessment process establishes eligibility. You don't need to work this out yourself.

Find out if you qualify

Am I eligible to claim?

How the Process Works

LPA doesn't pursue claims on your behalf. We buy your statutory late payment rights outright, pay you a fixed guaranteed sum, and take full responsibility for the claim from that point.

Here's how it works:

Step 1: Tell us your company details. That's all we need to get started. (Takes minutes)

Step 2: We check our records to assess whether you have a claim. (No input required from you)

Step 3: If you have a claim, we offer you a fixed, guaranteed purchase price. (Fixed amount, agreed upfront)

Step 4: We send our standard-form assignment documents for signature and ask you to confirm your bank details. (Straightforward documentation)

Step 5: Once in receipt of the signed documents and bank details, we make payment within 24 hours and your involvement is over. We then take full responsibility for the claims. (Immediate payment, zero ongoing obligations)

Am I eligible to claim?

Practical Advice for Businesses Dealing with Public Sector Late Payments

1. Know your entitlement

You don't need a detailed knowledge of the legislation to work with LPA. That said, a basic understanding of your rights is useful if your business regularly supplies the public sector. You can find answers to common questions on our Business FAQs page and in our insights hub. We also provide plain-language overviews of the relevant legislation.

2. Act before the limitation period expires

Your right to claim is time-limited. In England, Wales, and Northern Ireland, the limitation period is six years from the date payment was received. In Scotland, it is five years. The clock runs from the date of actual payment, not the invoice date or the date it became overdue. Find out more about the time limits that apply

Am I eligible to claim?

3. Don't let client relationship concerns put you off

A common reason businesses don't pursue late payment entitlements is concern about damaging ongoing relationships with public sector clients. Because LPA buys the claim outright, your business is not the party making demands. Once the rights are assigned to us, we pursue the claim independently. Your client relationship remains yours to manage.

4. Keep records of late payments

Where possible, retain records of invoices submitted, payment terms agreed, and any relevant correspondence. This is useful context if your situation is being assessed, though we do not require you to produce invoices as part of our process.

Ready to Get Started?

Many British businesses are sitting on a legal entitlement they have never acted on. If your business has supplied the public sector and received payments outside the 30-day period, you may be able to sell those rights to LPA for an immediate, guaranteed payment.

Use our eligibility checker to find out if you qualify in minutes.