Legal Action for Late Payments

This guidance offers advice for taking legal action for late payments.

If you run a small business and have an unresolved payment dispute with a larger customer, which you have been unable to resolve, the Office of the Small Business Commissioner (OSBC) may be able to help. We offer a free, confidential service and may be able to assist in resolving payment disputes.

Once legal action has been initiated, we won’t be able to assist with your complaint, so you may wish to explore this option before engaging in legal action. You can read more information about our service here, and get in touch with us directly via our Office of the Small Business Commissioner Enquiry Form.

Before Taking Action

Not all legal action requires a solicitor or court proceedings – checking your customer’s financial status can help determine if pursuing legal action is worthwhile.

Key checks include:

Using credit agency reports or Trust Online can involve a fee.

If you do decide to seek legal action, a short consultation with a solicitor can help assess your options. Many offer free or low-cost initial appointments, and organisations like your local Citizens Advice or Law Centre can provide additional guidance and support.

Legal action can involve sending a solicitor’s letter or making a money claim, which may prompt payment without court proceedings.

Documents You Will Need

You should ensure you have proof that you’ve attempted to resolve the issue before taking legal action. Recommended documentation includes:

Final warning letter to the customer about impending action.

Correspondence (emails, letters) showing negotiation attempts.

Making a Money Claim

If unpaid invoices remain unresolved, you can file a money claim to recover the amount owed, including compensation. Fees vary based on location and claim amount.

Mediation may be offered before court proceedings begin, potentially resolving the issue without further costs.

Claims exceeding £10,000 (England/Wales), £5,000 (Scotland), £3,000 (Northern Ireland) should be reviewed with legal advice.

Court Proceedings

If the claim reaches court, a judge’s decision will be legally binding. Costs may be awarded, but legal fees are not typically reimbursed. If successful, further enforcement action may be required.

If a customer refuses to pay despite a court order, enforcement options include:

Legal enforcement processes per UK region (England/Wales, Northern Ireland, Scotland).

Bailiffs (fees start at £242 in England/Wales).

A Statutory Demand is a formal request for payment of a debt. If someone owes you money, you can issue a statutory demand without needing a lawyer. The debtor has 21 days to either pay the debt or reach an agreement. If they fail to respond, you can apply to make them bankrupt or wind up their company, however this can require significant time and cost.

Remember the OSBC offers a free service to support small businesses resolve payment disputes with larger businesses. You can find more information about us and how we help small businesses here.