Statutory Demand for Unpaid Invoice UK: How to Force Payment for Debts Over £5,000
You've chased the invoice. You've sent a Letter Before Action. Maybe you've even got a CCJ. But the client still hasn't paid. For debts over £5,000, there's a weapon most creditors don't know about: the statutory demand.
A statutory demand is a formal written demand for payment that gives the debtor 21 days to pay. If they don't pay or reach an agreement, you can begin insolvency proceedings — petitioning to wind up their company or make them bankrupt. For most businesses, this is the nuclear option. The mere threat of it usually gets results.
What Is a Statutory Demand?
A statutory demand is a formal notice served under the Insolvency Act 1986 (Section 268 for individuals, Section 123 for companies). It's not a court order — you don't need permission from a court to serve one. It's a formal written demand stating:
- How much is owed
- Why it's owed (the debt, including statutory interest and compensation)
- That the debtor has 21 days to pay, reach a payment agreement, or apply to set aside the demand
- That failure to respond may lead to insolvency proceedings
For a company, the threshold is £750 (though using it for small debts is aggressive and courts may frown on it). For an individual, the threshold is £5,000.
Why Is a Statutory Demand So Effective?
Because the consequences of ignoring it are catastrophic for the debtor:
- Company: You can petition to wind up the company. The company goes into compulsory liquidation. Directors lose control. It's business death.
- Individual: You can petition for bankruptcy. Their assets are seized and sold. It stays on their credit file for 6 years. They may lose their home.
Most debtors who ignore letters, ignore emails, and even ignore CCJs will not ignore a statutory demand. The threat of insolvency focuses the mind like nothing else.
When Should You Use a Statutory Demand?
A statutory demand is appropriate when:
- The debt is undisputed — the client doesn't deny they owe you money
- The debt is over £750 (company) or £5,000 (individual)
- You've already tried normal debt recovery (chase emails, LBA) without success
- The debtor is deliberately avoiding payment, not genuinely unable to pay
Warning: If the debt is genuinely disputed (not just "I don't want to pay" but a real disagreement about what's owed), a statutory demand can be set aside by the court and you may face a costs order. Only use this for clear, undisputed debts.
Step-by-Step: How to Serve a Statutory Demand
Step 1: Calculate the Full Amount Owed
Your statutory demand should include the original invoice amount plus everything legally owed under the Late Payment of Commercial Debts (Interest) Act 1998:
- Statutory interest: 8% + Bank of England base rate (currently 3.75%) = 11.75% per year
- Fixed compensation: £40 (debts up to £999.99), £70 (£1,000–£9,999.99), or £100 (£10,000+)
- Reasonable recovery costs: Any costs you've incurred chasing the debt
Use our free late payment calculator to work out the exact amount including statutory interest and compensation.
Step 2: Complete the Correct Form
For a company debt, use the prescribed form in the Insolvency Rules 2016 (no official form number — but it must follow the prescribed format). For an individual debt, use Form 6.1 (Statutory Demand under Section 268(1)(a)).
The demand must include:
- Your full name and address
- The debtor's full name and address
- The exact amount owed and how it was calculated
- The basis of the debt (description of goods/services, invoice numbers)
- A statement that the debtor has 21 days to pay or compound
- Warning of insolvency consequences
Step 3: Serve the Demand
For a company: Deliver to the company's registered office address. You can find this on Companies House. Personal service is best — have someone hand-deliver it and make a contemporaneous note of the time, date, and who received it.
For an individual: Personal service is strongly recommended. This means physically handing it to the debtor. If you can't manage personal service, leave it at their last known address with a covering letter.
Keep proof of service. You'll need it if you proceed to insolvency.
Step 4: Wait 21 Days
The debtor has 21 days from service to:
- Pay in full — problem solved
- Reach a payment agreement — you can accept or reject this
- Apply to the court to set aside the demand — they have 18 days to do this
If none of these happen, you can proceed to insolvency.
Step 5: Petition for Insolvency (If Unpaid)
After 21 days with no payment, you can:
- Company: File a winding-up petition at the High Court (fee: £2,600 + £1,600 deposit = £4,200 total). This is expensive but usually recovered from the company's assets.
- Individual: File a bankruptcy petition at the county court (fee: £990 + £990 deposit = £1,980 total).
Important: Most cases never get this far. The statutory demand itself resolves 70-80% of cases because debtors don't want to face insolvency.
Costs
| Action | Cost |
|---|---|
| Statutory demand (DIY) | £0 (your time only) |
| Statutory demand (solicitor prepared) | £200 – £500 |
| Process server for delivery | £50 – £150 |
| Winding-up petition (company) | £4,200 (court fee + deposit) |
| Bankruptcy petition (individual) | £1,980 (court fee + deposit) |
Statutory Demand vs CCJ: Which Should You Use?
They serve different purposes:
- CCJ: Establishes the debt legally, damages credit, enables enforcement (bailiffs, charging orders). Best for debts under £5,000 or disputed amounts.
- Statutory demand: Threatens the debtor's existence as a business/their personal solvency. Best for larger undisputed debts where the debtor is deliberately not paying.
You can use both. Many creditors get a CCJ first, then serve a statutory demand when the debtor still doesn't pay. A CCJ makes the statutory demand even stronger because the debt is court-confirmed.
Risks and Pitfalls
- Disputed debts: If the debtor can show a genuine dispute, the court will set aside the demand and you may pay costs.
- Abuse of process: Using a statutory demand to pressure someone into paying a genuinely disputed debt is an abuse of process. Courts take this seriously.
- Debtor is already insolvent: If the company has no assets, winding it up won't get your money back. Check Companies House accounts before proceeding.
- Cost of petitioning: If you have to actually file the insolvency petition, costs are significant. Make sure the debt justifies the outlay.
Frequently Asked Questions
Can I serve a statutory demand without a solicitor?
Yes. There's no legal requirement to use a solicitor. You prepare the document, serve it, and file the petition yourself if needed. For straightforward debts, many creditors do this themselves.
What if the debtor pays part of the debt?
If the remaining amount is still above the threshold (£750 for companies, £5,000 for individuals), the statutory demand remains valid for the unpaid balance.
Can I serve a statutory demand by email?
No. A statutory demand must be served in hard copy. Personal service (hand delivery) is the most effective method. For companies, delivery to the registered office is acceptable.
How long is a statutory demand valid?
For the purposes of insolvency proceedings, a statutory demand is valid for 4 months after service on an individual. For companies, there's no explicit expiry but courts expect prompt action.
What if the debtor offers to pay in instalments?
You're under no obligation to accept instalments. However, if the offer is reasonable and you refuse it, a court may consider this when deciding costs. In practice, an instalment plan that actually gets you paid is often better than prolonged legal proceedings.
Start With the Calculator
Before serving a statutory demand, you need to know exactly how much you're owed — including statutory interest and compensation. Use our free late payment interest calculator to work out the total. If you need chase email templates and a Letter Before Action to try before escalating to a statutory demand, the Full Recovery Pack has everything you need for £9.99.
Most clients pay when they receive a properly drafted Letter Before Action. You may never need a statutory demand at all.