In England and Wales, a claim for an unpaid business debt under an ordinary contract usually has to be brought within six years of the date the payment fell due. If the contract was made as a deed, the period is twelve years. The clock can be restarted by a signed written acknowledgment or a part payment, but once the period has run out, nothing the debtor does later brings the claim back.
1. How long do you have to sue for an unpaid invoice?
The rules are in the Limitation Act 1980. For most business debts, the relevant one is section 5: an action founded on simple contract cannot be brought more than six years after the date on which the cause of action accrued.
A "simple contract" is any contract not made as a deed. That covers almost every everyday trading arrangement: a signed order, an accepted quote, your terms of business, or an email exchange agreeing a price.
This guide covers the law in England and Wales only. Northern Ireland and other parts of the UK have their own rules, and the periods there are not always the same.
2. When does the six years start?
The six years run from the date the "cause of action accrued". For a debt, that is generally the date the money became payable and was not paid. It is usually not the date you raised the invoice.
Suppose your terms give the customer 30 days from the invoice date to pay. The debt is not overdue until those 30 days have passed, so your right to sue, and the six-year period, starts at the end of the credit period rather than on the invoice date. If there were no agreed payment terms, the money may have been payable on completion of the work or on invoice, so read the contract and your terms carefully.
A few practical points follow from this:
- Each invoice usually has its own due date, so each one has its own deadline. An account with many invoices can have many limitation dates.
- Instalments under a payment plan each fall due on their own date, unless the agreement says the whole balance becomes payable on a missed payment.
- Statutory interest and compensation for late payment are claimed alongside the debt. Our guide to late payment interest on a business debt explains how they are worked out.
Section 32 of the Act can postpone the start of the period in cases of fraud, concealment or mistake. That is unusual in an ordinary unpaid invoice, and it is worth taking advice before relying on it.
3. What if the contract was made as a deed?
Some business agreements are made as deeds rather than simple contracts. Examples can include some loan agreements and some leases. A deed is a formal document that says it is a deed and is signed, witnessed and delivered as one.
Under section 8, an action on a "specialty", which includes a deed, cannot be brought more than twelve years after the cause of action accrued. Section 8 also says that the twelve years do not apply where another provision of the Act sets a shorter period for that kind of action.
Before assuming you have twelve years, check the document's wording and how it was signed. Treating a simple contract as a deed by mistake could mean missing the real deadline by six years.
4. Can the debtor restart the clock?
Yes. Section 29 applies to a debt or other fixed sum of money. If the person liable acknowledges the claim, or makes a payment towards it, the right to sue is treated as having accrued on the date of that acknowledgment or payment. In other words, a fresh six-year period starts from that day.
The period can be extended more than once. Each new acknowledgment or part payment starts it again. But section 29 also says that once a right of action is barred by the Act, a later acknowledgment or payment does not revive it. Timing is everything: an acknowledgment received one week before the deadline restarts the clock, and one received one week after it does not.
Section 29 also says that a payment of interest is treated as a payment towards the main debt. A part payment of interest therefore counts for the debt itself.
What counts as an acknowledgment
Section 30 sets out the formal requirements. An acknowledgment must be in writing and signed by the person making it. It can be made by the debtor's agent, and it must be made to the person owed the money or to their agent.
In practice, that means:
- Likely to count: a signed letter admitting the balance is owed; a signed reply to a statement of account confirming the figure; a signed proposal to pay the debt in instalments that accepts it is due.
- Unlikely to count: a phone call, however clear; a conversation at a meeting; a reply that disputes the debt or says nothing about whether it is owed.
- Uncertain: an email with only a typed name. The Act requires a signature but does not say what form it must take. Do not rely on an email if a signed letter can be obtained.
Because an acknowledgment can be made to the creditor's agent, one sent to a solicitor or recovery agent acting for you can also count.
Part payments
A part payment does not need to be in writing. Any payment by the debtor, or by someone acting for them, towards the debt restarts the clock from the date it is made. Keep a record of the date, the amount and which invoice it was paid against, because that record may be your evidence of the new start date.
5. Is an old debt wiped out?
Not exactly. Once the period has expired, the debt is not cancelled, but a claim for it can no longer succeed if the debtor objects. The Act says an action "shall not be brought" after the period, and the debt is often described as statute-barred.
Limitation is a defence. The court does not usually check the dates for the debtor. It is for the debtor to rely on the limitation period, and to say so in its defence.
That does not make it sensible to issue a claim you know is out of time. If the debtor raises limitation, the claim will fail and you may have to pay the debtor's costs.
6. What changes once you have a court judgment?
Getting a judgment changes the rules. Different limits now apply to enforcing it, and they also run for six years.
- Suing on the judgment. Under section 24(1), an action on a judgment cannot be brought after six years from the date the judgment became enforceable.
- Interest on the judgment. Under section 24(2), arrears of interest on a judgment debt cannot be recovered after six years from the date the interest became due. Interest that has been running for longer than that is lost, even if the judgment itself can still be enforced.
- Enforcement agents. Under rule 83.2 of the Civil Procedure Rules, a writ or warrant of control, a writ of execution, or a warrant of delivery or possession must not be issued without the court's permission where six years or more have passed since the date of the judgment or order.
A judgment is not a document to file away: decide on enforcement while it is fresh, and watch the six-year mark. If the debtor does not respond to your claim at all, our guide to default judgment for a business debt explains how a judgment can be obtained without a hearing.
7. How do you keep a debt within time?
Most limitation problems come from an account that has simply been left alone. These steps help:
- Diarise each due date. Record the date payment fell due for every unpaid invoice, and the date six years later. Put the deadline in a diary or your accounts system with a reminder well before it, not on it.
- Record every payment and admission. Note the date of each part payment and keep every letter in which the debtor accepts the debt. Each may reset the clock, so update your deadline.
- Ask for acknowledgments in writing. When a debtor says on the phone that they accept the balance, follow up with a short letter or statement of account for them to sign and return. Signed paper is far more useful than a note of a call.
- Do not let a payment plan drift. If instalments stop, the six years may be running from the last payment. Chase promptly, and work out the new deadline.
- Issue a claim before the deadline. If the debtor will not pay or acknowledge the debt, and the deadline is approaching, start court proceedings in good time. The government's guide to making a court claim for money explains how to apply online or by post, and our guide to the small claims and fast track routes explains which track a claim is likely to go on.
Leave a margin. Preparing a claim properly takes time, and you should normally send a letter before action and give the debtor a chance to reply first. Our guide to recovering a business debt in the UK walks through the usual steps from first reminder to judgment.
8. When to pass it on
You can manage limitation yourself, but a debt is often worth handing over when:
- the deadline is within the next few months and the debtor is not engaging;
- you are not sure when payment fell due, or whether a document is a deed;
- the debtor has acknowledged the debt in a way that may not meet the rules in section 30;
- you have a judgment that is close to six years old, or the debtor's assets are hard to find.
If you have an old debt and are unsure where you stand, get in touch with the dates and paperwork you have, and we can talk through the options.
This guide is general information about the law in England and Wales as it stood when it was written. It is not legal advice, and it does not take account of your circumstances. For advice on a particular case, speak to a solicitor.