Letter Before Action: A Guide for UK Businesses

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If a customer has ignored your reminders and statements, a Letter Before Action is usually the last formal step before court. Sent properly, it often prompts payment or a proper response. Sent badly, or skipped, it can cost you later.

What is a Letter Before Action?

A Letter Before Action (also called a letter before claim or letter of claim) is a formal written demand sent before a court claim is issued. It sets out what is owed and why, and gives the debtor a final chance to pay or explain why they dispute the debt.

In England and Wales, the courts expect both sides to exchange enough information to understand each other's position, try to settle, and consider alternative dispute resolution before going to court. These expectations are set out in the Civil Procedure Rules, in the Practice Direction on Pre-Action Conduct and Protocols.

Which rules apply to my debt?

It depends on who owes you the money.

The debtor is an individual, including a sole trader. The Pre-Action Protocol for Debt Claims applies. The letter must enclose an Information Sheet, a Reply Form and a Financial Statement, and the debtor has 30 days from the date of the letter to reply.

The debtor is a limited company or another business that is not a sole trader. The Debt Claims Protocol does not apply. The Practice Direction on Pre-Action Conduct sets the standard instead: the debtor should respond within a reasonable time, which it describes as 14 days in a straightforward case.

The debtor is in Scotland. Scottish procedure is different. Claims up to £5,000 go through Simple Procedure in the Sheriff Court, and larger claims through Ordinary Cause. See our Debt Recovery in Scotland page.

What should a Letter Before Action include?

For a business-to-business debt, a clear letter normally sets out:

• who is owed the money, and by whom
• the amount, broken down by invoice
• the basis of the claim, such as the contract, order or terms of trade
• any statutory interest and compensation being claimed, and how they were calculated
• a deadline for payment or a reasoned response
• how to pay
• what will happen if there is no response, such as issuing a court claim

Copies of the key documents, such as invoices, signed terms or delivery notes, should be offered or enclosed.

Can I add interest and compensation?

For business-to-business debts, the Late Payment of Commercial Debts (Interest) Act 1998 lets you claim statutory interest at 8% above the Bank of England base rate, unless your contract sets a different, substantial remedy.

You may also claim fixed compensation for each qualifying invoice:

• £40 for debts under £1,000
• £70 for debts of £1,000 to £9,999.99
• £100 for debts of £10,000 or more

If your reasonable recovery costs are higher than the fixed sum, you can claim the difference. The Act does not apply to debts owed by consumers.

What happens if I skip it?

You can still issue a claim, but you risk being penalised. If a court finds that a party has not followed the pre-action rules, it can order them to pay some or all of the other side's costs, reduce the interest a successful claimant receives, or pause the case until the steps have been taken. Winning the debt claim does not guarantee you recover your costs.

What if the debtor ignores the letter?

Once the deadline has passed without payment or a reasoned response, you can issue a court claim. Before recommending that, we check the debtor is still trading and that a judgment would be worth enforcing. Our legal partner, an established firm of solicitors, can then issue proceedings with your written approval.

Is a Letter Before Action the same as a final demand?

No. A reminder or final demand is a commercial chase. A Letter Before Action is the formal pre-action step the courts expect: it sets out the claim, the amount and its basis, gives a deadline, and says what will happen if there is no response.

Do I need a solicitor to send one?

No. A business can send its own Letter Before Action, as long as it follows the pre-action rules above. Recovia prepares and sends them on clients' behalf, checking first which rules apply to the debtor.

How Recovia can help

We prepare and send Letters Before Action on your behalf, checking first which rules apply to your debtor and calculating any interest and compensation correctly. Where a debtor still does not pay, our legal partner, an established firm of solicitors, can issue proceedings with your written approval.

No collection, no fee on suitable cases. Tell us about your debt or call 01527 369593.

This guide is general information for UK businesses, not legal advice. Recovia Ltd is not a firm of solicitors.