Using Money Claim Online to recover a small business debt

When your polite reminders and firmer follow-ups for an unpaid invoice go unanswered, it can feel like you’ve hit a brick wall. For many UK small business owners, freelancers, and accountants, the idea of legal action seems daunting and expensive. However, for straightforward debts under £10,000, there is a formal, relatively low-cost path you can take yourself, without hiring a solicitor: the government's Money Claim Online (MCOL) service. This guide provides a practical, step-by-step walkthrough of how to use MCOL to recover what you're owed.

This is a formal legal process, but it's designed to be used by ordinary people and businesses. We'll break down the jargon, explain the costs, and show you exactly what information you need to prepare, from calculating statutory interest to writing your 'particulars of claim'.

Before You Start: The Pre-Action Protocol

You cannot simply jump straight to issuing a court claim. The UK courts expect you to have made reasonable attempts to settle the matter first. This is known as the 'pre-action protocol'. Failing to follow it could result in the court penalising you, even if you win your case.

For small business debts, this protocol essentially means you must have a clear, documented history of chasing the payment and have sent a final, formal warning.

Your pre-action steps should include:

1. A Clear Invoice Trail: You must have issued a clear, correct invoice with payment terms, the amount due, and your payment details.
2. Systematic Chasing: You need evidence of your follow-ups. This includes the initial friendly reminders, firmer overdue notices, and phone calls (which you should log with dates and times). This is where an automated system can be invaluable; products like InvoiceReminder create a perfect, timestamped audit trail of every email sent to the client, which can be used as evidence.
3. The Letter Before Action (LBA): This is the most critical pre-action step. It's a formal letter (sent by email and ideally also by post) that puts the debtor on notice that you intend to start court proceedings if the debt is not paid by a specific deadline.

What to Include in a Letter Before Action

Your LBA is your final warning. It must be clear and professional, not angry or threatening. It should state:

• Your business name and address.
• The debtor's business name and address.
• The total amount owed.
• A reference to the specific invoice(s) (e.g., "Invoice #123 dated 15th January 2024 for £1,500.00").
• That you will be adding statutory interest and late payment compensation to the claim, as is your right under the Late Payment of Commercial Debts (Interest) Act 1998.
• A final deadline for payment (e.g., "within 14 days of the date of this letter").
• A clear statement that if payment is not received by this date, you will "commence legal action through the County Court Money Claims Centre without further notice".

Only when the deadline in your LBA has passed without payment should you proceed to Money Claim Online.

What is Money Claim Online (MCOL)?

Money Claim Online is the official HM Courts & Tribunals Service website for starting a County Court claim for a fixed sum of money. It’s designed to be a more efficient and less costly alternative to the traditional paper-based court system.

While you can technically claim up to £100,000 via MCOL, this guide focuses on the 'small claims track'. In England and Wales, this is for most straightforward disputes valued at £10,000 or less. The small claims track is designed to be less formal, and the costs you can recover are strictly limited, which is why it's well-suited for individuals and small businesses acting without a solicitor.

Is Your Claim Suitable for MCOL?

Before you spend time and money, check if your situation fits the MCOL criteria. Your claim must be:

• For a fixed amount of money: This is perfect for unpaid invoices where the value is clear. It's not suitable for claims where the amount is uncertain and needs a judge to decide, like damages for reputational harm.
• Against one or two defendants: You can claim against an individual, a limited company, or a partnership. If you need to claim against three or more parties, you can't use the online service.
• The defendant must have a UK address: The MCOL system is for serving claims within the UK.
• Under £100,000: As noted, we're focusing on the sub-£10,000 small claims limit.

Crucially, this process is for debts you believe are undisputed. If you know the client has a genuine and complex counterclaim (e.g., they are arguing your work was fundamentally defective and caused them significant loss), the matter may be too complex for a simple MCOL claim and you should seek legal advice. However, don't be put off by vague, unsubstantiated complaints made only after you started chasing for payment – this is a common delay tactic.

A Practical Walkthrough of the MCOL Process

Ready to proceed? Here’s what you need to do, step-by-step.

1. Gather Your Information

Preparation is everything. Before you even visit the MCOL website, gather all of these details in one place:

• Your Details: Your full business name, address, and contact information.
• The Debtor's Details: Their correct, full legal name and address.
  • For a limited company: Use their registered company name (check Companies House) and their registered office address.
  • For a sole trader: Use their personal name and their last known address (which may be their trading address).
• The Invoices: The invoice numbers, dates, and amounts.
• Your Terms: Your standard payment terms (e.g., "payment due within 30 days").
• The LBA: The date you sent the Letter Before Action.
• Interest & Compensation Calculation: The figures for statutory interest and compensation you will be adding. We'll cover this next.

2. Calculate Your Claim Total

You are not just claiming the original invoice amount. For business-to-business debts in the UK, the law is on your side. You are entitled to add interest and a fixed compensation sum.

Fixed Compensation

The Late Payment of Commercial Debts (Interest) Act 1998 allows you to add a one-off compensation payment for each overdue invoice. The amount is set by law and depends on the value of the invoice.

Invoice Value	Compensation You Can Add
Up to £999.99	£40
£1,000 to £9,999.99	£70
£10,000 or more	£100

You can claim this for each overdue invoice. For example, if a client owes you two separate invoices, one for £500 and one for £1,200, you can add £40 + £70 = £110 in compensation.

Statutory Interest

You can also claim interest at a statutory rate. The formula is 8% + the Bank of England base rate. This base rate can change, so you should always check the current rate on the Bank of England's website.

To calculate the interest:

1. Find the base rate that was in effect for the period the debt was late.
2. Add 8% to it. This is your annual interest rate.
3. Calculate the daily interest: (Invoice Amount x Annual Interest Rate) / 365.
4. Multiply the daily interest by the number of days the payment is late (from the day after it was due until the day you issue the claim).

Example:

• Invoice Amount: £2,000
• Payment due: 1st March
• You are filing the claim on: 30th May (90 days late)
• Assume the Bank of England base rate is 5.25%.
• Statutory interest rate: 8% + 5.25% = 13.25%
• Annual interest: £2,000 x 0.1325 = £265.00
• Daily interest: £265.00 / 365 = £0.726
• Total interest to claim: 90 days x £0.726 = £65.34

Your total claim amount would be: £2,000 (invoice) + £70 (compensation) + £65.34 (interest) = £2,135.34.

3. Register and Start Your Claim on the MCOL Website

Go to the official gov.uk page for Money Claim Online and follow the links to register. You will need to create a Government Gateway account if you don't already have one.

Once logged in, the process is a series of straightforward forms:

• Claimant & Defendant: You'll enter your details and the debtor's details. Be precise – use the exact legal name and registered address.
• Claim Amount: You will state the total amount you are claiming (invoice total + interest + compensation).
• Interest: There is a specific section to detail how you are claiming interest. You should select the option to claim interest under the Late Payment of Commercial Debts (Interest) Act 1998. You'll enter the interest rate and the daily rate you calculated. You can also claim continuing interest until the debt is paid.

4. Writing the 'Particulars of Claim'

This is the section that worries most people, but it can be very simple. The 'Particulars of Claim' is a concise summary of your case. It doesn't need to be a long essay. Just state the facts clearly.

Here is a template you can adapt:

1. The Claimant is [Your Business Name], a supplier of [e.g., IT support services]. The Defendant is [Debtor's Business Name].
2. On or around [Date], the Claimant provided [e.g., a new website design] to the Defendant at their request.
3. The Claimant issued invoice [Invoice Number] for this work on [Invoice Date] for the sum of £[Invoice Amount], with payment due on [Due Date].
4. Despite reminders and a Letter Before Action dated [Date of LBA], the Defendant has failed to pay the invoice.
5. The Claimant is claiming the invoice sum of £[Invoice Amount].
6. The Claimant is also claiming statutory late payment compensation of £[40/70/100] under the Late Payment of Commercial Debts (Interest) Act 1998.
7. The Claimant is also claiming statutory interest on the debt pursuant to the same Act, at a rate of [e.g., 13.25%] per annum. From [Day after due date] to the date of issue of this claim ([Number] days), this amounts to £[Interest Amount]. The Claimant is also claiming continuing interest at a daily rate of £[Daily interest rate] until judgment or full payment.

This is all you need. Stick to the facts.

5. Paying the Court Fee

You have to pay a court fee to issue the claim. This fee is based on the total value of your claim (including interest). The good news is that this fee is added to the total amount the debtor owes you. If they pay, or if you get a judgment, you get this fee back.

The fees are based on a sliding scale. As of late 2023/early 2024, the MCOL fees for claims up to £10,000 are:

Claim Value (including interest)	Court Fee
Up to £300	£35
£300.01 to £500	£50
£500.01 to £1,000	£70
£1,000.01 to £1,500	£80
£1,500.01 to £3,000	£115
£3,000.01 to £5,000	£205
£5,000.01 to £10,000	£455

Note: These fees are subject to change. Always check the official MCOL website for the current fee schedule before starting your claim.

After you've filled in all the details and paid the fee, you can submit your claim. The court will then formally issue and 'serve' it on the defendant.

What Happens After You've Filed the Claim?

Once the claim is served, the debtor has 14 days to respond (or 19 days from the date it was issued, to allow for postage). They have several options:

• Pay in full: The best-case scenario. The shock of a court claim is often enough to prompt immediate payment. If they pay you directly, you must inform the court the case is settled.
• Admit the debt: They can file a response admitting they owe the money. They might offer to pay by instalments. You can then decide whether to accept their offer or ask the court to set a payment plan via a 'judgment by consent'.
• File a defence: If they genuinely dispute the debt, they can file a defence explaining why they don't owe the money. The claim will then leave the simple MCOL process and be transferred to the defendant's local County Court. At this point, you should seriously consider seeking legal advice.
• Do nothing: This is very common. If the debtor ignores the claim completely, you can request a 'judgment by default' after the deadline has passed. This means you win automatically. The court issues a County Court Judgment (CCJ) against the debtor for the full amount claimed, including your interest, compensation, and court fee.

A CCJ is a serious black mark on an individual's or company's credit file for six years, making it difficult for them to get credit, loans, or even trade accounts. The threat of a CCJ is a powerful motivator for payment.

Enforcing a Judgment

Getting a judgment is a major victory, but it's not always the end of the story. If the debtor still doesn't pay, you have to 'enforce' the judgment. This means taking further action to physically recover the money.

Common enforcement methods include:

• Instructing County Court Bailiffs or High Court Enforcement Officers (HCEOs): For judgments over £600, you can transfer the writ to HCEOs (the "High Court Sheriffs" often seen on TV). They have greater powers than bailiffs to visit the debtor's premises and seize assets to cover the debt.
• Third-Party Debt Order: You can ask the court to freeze the debtor's bank account and order the bank to pay the money directly to you.
• Charging Order: You can secure the debt against property the debtor owns, like a house or commercial building.

Each of these steps has its own process and fees, but they provide powerful tools for turning your court judgment into cash.

Frequently Asked Questions

Can I claim for an invoice that is several years old?

In England and Wales, the statute of limitations for most contract-based debts is six years from the date the debt was due or last acknowledged in writing. If the invoice is more than six years old and the debtor hasn't made any contact or payment in that time, you likely cannot pursue it through the courts.

Do I need a solicitor to use Money Claim Online?

No. The MCOL service and the small claims track are specifically designed to be used by 'litigants in person' – that is, people and businesses representing themselves without legal help. As long as your claim is straightforward, you should be able to navigate the process yourself.

Can I add my own admin costs or time spent chasing to the claim?

Generally, no. You cannot add a charge for the time you've spent writing emails or making calls. The law provides for this through the fixed compensation sums (£40, £70, £100). These are intended to cover your costs of recovery, so you can't add your own on top.

What's the difference between using MCOL and sending a statutory demand?

MCOL is used to get a County Court Judgment (CCJ) for an undisputed debt. A statutory demand is a much more aggressive precursor to a winding-up petition (for a company) or bankruptcy proceedings (for an individual). It should only be used for completely undisputed debts over £750 (for companies) or £5,000 (for individuals), as a false or disputed demand can have serious consequences for you. MCOL is the standard first step for most small business invoice disputes.

How long does the MCOL process take?

If the debtor pays immediately or you get a judgment by default, you could have the matter resolved in 3-4 weeks from filing the claim. If the debtor files a defence, the timeline becomes much longer and more unpredictable as it enters the court system proper, potentially taking many months.

What if I don't know the director's home address?

If you are claiming against a limited company, you should always issue the claim against the company itself, not the director personally (unless they have given a personal guarantee). You must use the company's registered office address, which you can find for free on the Companies House website.

Automate Your Chasing to Avoid Court Action

While Money Claim Online is a powerful tool, it should always be a last resort. The best way to manage credit control is to have a robust process that stops invoices from becoming seriously overdue in the first place. A systematic and consistent chasing process gets you paid faster and builds the perfect paper trail for legal action if it ever becomes necessary.

InvoiceReminder helps UK small businesses, freelancers, and accountancy practices achieve this by automating the entire invoice chasing process. It connects to Xero, QuickBooks, Sage, and FreeAgent to send scheduled reminders that escalate from friendly to firm, saving you the manual work and stress of chasing by hand. The system is built by the team behind WeCovr, a trusted UK company that has arranged over one million insurance policies and is authorised and regulated by the Financial Conduct Authority. You can automate your email reminders right now with the InvoiceReminder Free plan, which is currently available at no cost.