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Say the interest is 50GBP per day. Presumably the interest doesn't count as debt as well? So the interest keeps increasing? I.e. initial debt is 50000. Next debt isn't 50050, so interest would become 51pd?
Not if you're charging statutory interest, as discussed a month ago. It accrues at 1/365th of the annual rate, but doesn't compound. That's advantageous to the lender for periods shorter than a year. Also, you're supposed to re-invoice when you add interest, so presumably (and IANAL, so check with one if you want an expert opinion) the new invoice gets your contractual settlement terms (e.g. 28 days net) and isn't an unpaid debt until that new settlement period expires, but the principle+first batch of interest then becomes the new debt on which you can charge interest.
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gbj_tester
Say I had a client who owed a sum of money that's gone well overdue.
I've now decided to start charging them interest on the debt.
My understanding is that I charge interest on the gross including the VAT but the VAT position is unaffected (I don't need to pay extra VAT). I also don't pay VAT on debt recovery costs that are claimed.
Say the interest is 50GBP per day. Presumably the interest doesn't count as debt as well? So the interest keeps increasing? I.e. initial debt is 50000. Next debt isn't 50050, so interest would become 51pd? (obvious maths is obvious / way off, just trying to illustrate quickly).
And another question. Presumably companies may try to pay original debt but not pay the interest. Presumably the costs of reclaiming that interest aren't worth the actual achievable sum unless it's in the thousands which would take some while to accrue?