There are several rules and regulations regarding the payment of invoices by businesses. Some of the key rules are:

1. Prompt Payment Code: The Prompt Payment Code is a voluntary code of conduct for businesses that sets out the principles for paying invoices promptly. By signing up to the code, businesses agree to pay suppliers within a reasonable time frame and to communicate clearly with suppliers about payment terms.
   
   

2. Late Payment of Commercial Debts (Interest) Act 1998: This act allows suppliers to charge interest on late payments, as well as compensation for debt recovery costs. The interest rate is 8% above the Bank of England base rate, and the compensation can be up to £40 for debts under £1,000, £70 for debts between £1,000 and £10,000, and £100 for debts over £10,000.
   
   

3. The Small Business, Enterprise and Employment Act 2015: This act requires larger businesses (those with over 2,000 employees or a turnover of over £36 million) to publish their payment practices and performance, including the average time it takes to pay invoices.
   
   

4. EU Late Payment Directive: The EU Late Payment Directive sets out minimum requirements for the payment of invoices across the European Union, including the right to interest and compensation for late payment.

The Prompt Payment Code (PPC) is a voluntary code of practice for businesses, administered by the Office of the Small Business Commissioner (OSBC) on behalf of BEIS. It was established in December 2008 and sets standards for payment practices between organisations of any size and their suppliers.

The Ethos of the Code 

Signatories have always undertaken to:

1. Pay suppliers on time, within agreed terms;

2. Give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment;

3. Support good practice throughout their supply chain by encouraging adoption of the Code.

Code Reforms

In changes announced on 19 January 2021, the Code has been strengthened by:

• confirming the requirement to pay 95% invoices within 60 days

• introducing an added requirement that 95% invoices from small businesses (with less than 50 employees) must be paid within 30 days (effective from 1 July 2021 for existing signatories)

• requiring small and medium sized signatories to report annually on their payment performance, on a comply of explain basis

• promoting and strengthening the Code website

• requiring signatories to recognise the right of suppliers to charge late payment interest and charges if an invoice is paid late without justification

• stating that applications to join the Code must be signed by the Chief Executive, Finance Director or, in the case of smaller businesses, the company owner

• suppliers should be provided with a contact point for payment queries
  
  

Suspensions and Removals

 Companies revealing payment of less than 90% of invoices within 60 days will be suspended from the Code, until they achieve at least that percentage. If a suspended signatory fails to engage with the PPC administrators, or compliance is not achieved within a reasonable timescale, the signatory will be permanently removed from the Code.

When a signatory’s payment practice is challenged, the PPC administrators will investigate and achieve a positive outcome through mediation with both parties wherever possible. If this fails to achieve a satisfactory outcome and the Compliance Board determines that the payment practice is non-compliant, the signatory may be removed from the Code.

In addition to making prompt payments from your business, it's equally important that you receive prompt payments for money owed to your business. 

The key to recovering payments owed to your business is to be persistent, professional, and strategic. This means sending out timely reminders and presenting your invoices correctly with the required payment terms.

The invoices you send out on behalf of your business must include:

• a unique identification number

• your company name, address and contact information

• the company name and address of the customer you’re invoicing

• a clear description of what you’re charging for

• the date the goods or service were provided (supply date)

• the date of the invoice

• the amount(s) being charged

• VAT amount if applicable

• the total amount owed

Sole trader invoices

If you’re a sole trader, the invoice must also include:

• your name and any business name being used

• an address where any legal documents can be delivered to you if you are using a business name
  
  

Limited company invoices

If your company is a limited company, you must include the full company name as it appears on the certificate of incorporation.

If you decide to put names of your directors on your invoices, you must include the names of all directors.

VAT invoices

You must use Making Tax Digital VAT invoices if you and your customer are VAT registered.

These include more information than non-VAT invoices.

Payment terms

Your business can set its own payment terms, such as discounts for early payment and payment upfront.

Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service.

Late Payment Interest

Your business has the right to charge late payment interest. The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ - this is 8% plus the Bank of England base rate for business to business transactions. You cannot claim statutory interest if there’s a different rate of interest in a contract.

A new invoice will need to be sent if you decide to charge interest for late payment.

Under the Late Payment of Commercial Debts (interest) Act 1998, your business can also charge a business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it.

The amount you’re allowed to charge depends on the amount of debt. You can only charge the business once for each payment.

• Up to £999.99 - £40

• £1,000 to £9,999.99 - £70

• £10,000 or more - £100

If you’re a supplier, you can also claim for reasonable costs each time you try to recover the debt

There are several scenarios whereby your business may need to take further action to recover a debt owed to it if ordinary late payment reminders have failed:

1. Claiming money from a dissolved company: When a company is dissolved, all of its assets pass to the Crown and are legally known as ‘bona vacantia’ (ownerless property). Assets include: property and land, mortgages, shares, intellectual property, for example trademarks, registered designs and patents. You can apply to restore a dissolved company if it owes you money using form N208. The process and fee is outlined on GovUK in addition to information on how to buy a dissolved company's asset.
   
   

2.  Apply for a discretionary grant: Former shareholders/administrators/liquidators & CVA supervisors of the dissolved company may be able to apply for a government discretionary grant (maximum 3k). A grant will only be made if the applicant undertakes not to restore the company in the future and all creditors have been paid. The process and fee(s) are outlined on GovUK.
   
   

3. Register your claim for a bankrupt person or liquidation: You can contact the person handling the case: find their details on either: the Individual Insolvency Register if it’s an individual bankruptcy; the Companies House website if it’s a company liquidation.
   
   If you’re owed more than £1,000 you’ll need to submit a ‘Proof of Debt’ form. Read more guidance here.
   
   

4.  Apply for a repayment after restoration of a company: When a company has been restored to the register, an application can be made to release any cash assets that were passed to or collected by the Bona Vacantia Division (BVD) of the Treasury Solicitor at the date of dissolution. An RA15 application allows the relevant person(s) to apply for repayment to be made to the restored company or a third party.
   
   

5.  Issue a statutory demand: You can make a statutory demand to ask for payment of a debt from an individual or sole trader/partnership (5k debt or more) or limited company (debt £750 or more). Anyone who’s owed money (the ‘creditor’) can make a statutory demand. If the debt’s over 6 years old, you cannot usually make a statutory demand.
   
   

6. Make someone bankrupt or apply for compulsory liquidation: If a debt has not been settled through a statutory demand, your business can apply for a compulsory liquidation or make a person(s) bankrupt.
   
   

7. Use a mediation service: Parties in dispute can try to negotiate an agreeable settlement with the help of an impartial third person, who mediates between them. This usually cheaper than starting a county court claim. The mediator assists the parties through a discussion process with the objective of helping them find that settlement at the end.
   
   

8. Use a debt collection service: You can use a debt collection service to recover money owed to your business. Some trade organisations have a complimentary or additional debt collection service to help you with this. It's a good idea to check.
   
   

9. Make a court claim for money: You can apply to a county court to claim money you’re owed by a person or business. This is known as making a court claim. It used to be called taking someone to a ‘small claims court’. You can apply online (claims under 10k) or by post. If you do not know the exact amount of the debt, you must use a paper application. There are scaled fees to apply, if you're on low income, you can apply for exemption,  by post or online.
   
   

10. Letter before action: Litigation should be used as a last resort. The courts expect all parties to have exchanged certain information before making a claim, this is called a pre-action protocol. A letter before action needs to have the following information:
    
    

a) understand each other’s position;

(b) make decisions about how to proceed;

(c) try to settle the issues without proceedings;

(d) consider a form of Alternative Dispute Resolution (ADR) to assist with settlement;

(e) support the efficient management of those proceedings; and

(f) reduce the costs of resolving the dispute.