How to write terms and conditions for your invoices

When it comes to choosing terms for the invoices you send out, you may wonder what's right for you. In this article, we've collected the most frequently asked questions from iZettle users and explain everything from the rules around late payments, to the collection of fees.

Zettle has provided these FAQs for information purposes only.  The answers to these FAQs should not be interpreted as legal advice and iZettle disclaims all liability in relation to any reliance you place on these FAQs.  The answers to the FAQs below are given on the assumption that any agreements entered into with your customers were entered into on or after 14 May 2013.  Please seek independent legal advice in relation to any contracts that you enter into with customers.

Can I charge a fee for issuing the invoice?

If your customer is a consumer:
We do not recommend charging a fee for issuing the invoice. Such a fee would be in breach of consumer protection laws and unenforceable against the consumer unless: (i) it is explicitly brought to the attention of the customer in their agreement with you; (ii) the customer gives their express consent to being charged such a fee; and (iii) the fee represents the actual cost to you (i.e. an administrative or processing cost) of issuing the invoice.

If your customer is a business or sole trader:
Additional fees such as issuing fees or handling fees may only be charged if you have expressly stated that you will charge such fees in your agreement with the customer that you entered into before you issued the invoice.

Can I charge interest and, if so, how high can the interest rate be?

If your customer is a consumer:
You are able to charge interest on late payments.  However, this should not in any circumstances be higher than four per cent (4%) above the base rate of one of the UK clearing banks. Interest should be calculated from the date the payment became overdue until the date payment is received.
Any interest rate that you want to charge on overdue payments should be explicitly stated in your agreement with the customer.

If your customer is a business or sole trader:
You are able to charge another business interest on late payments.  There is no restriction on the rate of interest that you can charge another business for late payment.  However, the interest rate should be reasonable and you should specify the rate of interest in your agreement with the customer. Please note that it is standard practice for businesses to set the interest for late payments at 4% above the Bank of England base rate.

Where no interest rate is specified, you will still be permitted to charge interest but it will be set at a rate of 8% above the Bank of England base rate.

Can I charge a reminder fee?

If your customer is a consumer:
We do not recommend charging a fee for issuing a payment reminder to your customers.
Such a fee would be in breach of consumer protection laws and unenforceable against the consumer unless: (i) it is explicitly brought to the attention of the customer in their agreement with you; (ii) the customer gives their express consent to being charged such a fee; and (iii) the fee represents the actual cost to you (i.e. an administrative or processing cost) of issuing the payment reminder.

If your customer is a business or sole trader:
You can charge a reminder fee but should specify this in your agreement with the customer.
Where you do not specify a reminder fee in your agreement, you will still be entitled to charge a fixed fee payment to the customer once interest begins to run on an overdue payment. This is in addition to the interest on the debt.

The amount is fixed according to the size of the overdue debt:
Debt below £1,000: fixed fee £40;
Debt at least £1,000 but less than £10,000: fixed fee £70;
Debt £10,000 or more: fixed fee £100,
(each a "Fixed Fee").

A Fixed Fee can only be claimed once per overdue payment.
For example, if you have a contract with a customer for the sale of products for £2,000 and the contract states that full payment is due on 1 June, you may charge the customer a Fixed Fee of £70 if payment is not received by or on 1 June.

However, if your contract states that payment is due in two instalments (e.g. £1,500 on 1 June, followed by £500 on 1 July), you may charge the customer a Fixed Fee of £70 if payment of the first instalment is not received by or on 1 June and you can charge the customer a further Fixed Fee of £40 if payment of the second instalment is not received by or on 1 July.

Can I charge a collection fee or a late payment fee?

If your customer is a consumer:
We do not recommend charging a fee to your customers for collection or late payment.
Such a fee would be in breach of consumer protection laws and unenforceable against the consumer unless: (i) it is explicitly brought to the attention of the customer in their agreement with you; (ii) the customer gives their express consent to being charged such a fee; and (iii) the fee represents the actual cost to you (i.e. an administrative or processing cost) of collection or late payment.

If your customer is a business or sole trader:
Additional fees such as these may only be charged if you have expressly stated that you will charge such fees in your agreement with the customer that you entered into before you issued the invoice.  You may charge a Fixed Fee as specified under "Can I charge a reminder fee?" above.

Do I have the right to claim compensation for debt recovery costs?

If your customer is a consumer:
Such a fee would be in breach of consumer protection laws and unenforceable against the consumer unless: (i) it is explicitly brought to the attention of the customer in their agreement with you; (ii) the customer gives their express consent to being charged such a fee; and (iii) the fee represents the actual cost to you (i.e. an administrative or processing cost) of debt recovery action.

If your customer is a business or sole trader:
If a Fixed Fee is payable by the customer (as specified under "Can I charge a reminder fee?" above), you will also have an implied contractual right to be paid the reasonable costs of recovering the debt, less the Fixed Fee.

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