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Statutory Demand vs Debt Recovery: Which Route Suits an Unpaid Commercial Invoice
A statutory demand can suit a clear, undisputed company debt of at least £750 where insolvency action may genuinely follow. Standard debt recovery — letters, negotiation and, if necessary, a court claim — is usually safer where liability is disputed, the debt is smaller, or preserving a trading relationship matters.
What a statutory demand actually is
A statutory demand is a formal written demand under the Insolvency Act 1986. There is no court fee simply to prepare and serve one, although professional service may cost money. A company normally has 21 days after service to pay or agree payment. If at least £750 remains unpaid, the creditor may then be able to present a winding-up petition.
It is not a substitute for resolving a genuine dispute. Where a debt is substantially disputed, insolvency proceedings may be restrained and the creditor can face costs. Our guide on statutory demands done right explains the process and service requirements.
What standard debt recovery involves
Standard recovery normally begins with reminders and a formal letter before action. The Pre-Action Protocol for Debt Claims does not generally govern company-to-company debts: it applies where a business claims payment from an individual, including a sole trader. Where no specific protocol applies, the Practice Direction on Pre-Action Conduct normally allows 14 days for a straightforward response and up to three months for a very complex case.
Our pre-action protocol for debt claims guide explains the protocol where it applies. If correspondence fails, a creditor may issue a county court claim and, after judgment, consider the CCJ enforcement options after judgment.
| Factor | Statutory demand | Standard recovery |
|---|---|---|
| Best suited to | Clear, undisputed debt where insolvency action is genuinely contemplated | Disputed debts or ordinary collection |
| Key timing | 21 days to pay or agree | Depends on pre-action steps and court timetable |
| Initial cost | No court fee to serve | Court fees apply if proceedings start |
| Main risk | Misuse on disputed debt can lead to injunction and costs | Litigation costs and enforcement risk |
| Possible outcome | Payment/agreement or winding-up proceedings | Payment, settlement or judgment |
A winding-up petition is much more expensive than serving the demand: current government charges include a £352 court fee and £2,600 petition deposit.
When a statutory demand may fit
This route is strongest where the debt is due, clearly evidenced and genuinely undisputed. It should not be used merely as pressure where there is a bona fide dispute.
For qualifying B2B debts, statutory interest is generally eight percentage points above the applicable Bank of England reference rate, unless the contract provides a substantial alternative remedy. Fixed compensation may also apply. Our guide on how to claim 8% statutory interest explains the calculation.
This can arise in construction, but disputes over valuations, defects or set-offs can make insolvency action inappropriate. Our construction debt collection service deals with these issues.
When standard recovery is the safer route
If there is a genuine dispute over goods, services, amount or contractual entitlement, use ordinary dispute resolution. Our flowchart on resolving disputed invoices is a useful starting point, and our comparison of mediation vs litigation for unpaid invoices explains the alternatives.
Cross-border cases are more complex than saying statutory demands are unavailable. Government guidance confirms a statutory demand can be served abroad, but local service rules and UK insolvency jurisdiction must be considered. Our international debt collection service handles overseas recovery.
Before choosing either route, run a credit check where appropriate. Neither a judgment nor an insolvency process guarantees payment if the debtor has no recoverable assets. Our article on recovering debt from insolvent customers explains the alternatives.
Bringing the two together
A creditor may start with ordinary collection and later consider a statutory demand if the debt remains genuinely undisputed and insolvency action is proportionate. Our guide on when to escalate to third party collections covers escalation points, while outsourced credit control can help identify overdue accounts earlier.
Not sure which route fits your invoice?
Getting the route wrong can add cost and delay. As a commercial debt collection agency, Taurus Collections can assess the debt, evidence and debtor position before recommending the next step. Contact the team for a consultation and review the applicable fee terms before proceeding.
Need Expert Debt Collection Advice?
If your business is dealing with overdue invoices or difficult debtors, speak to Taurus Collections for practical, professional support with commercial debt recovery.
Karl Baker
Karl Baker is the founder of Taurus Collections and his company has helped recover over £1.1 million worth of debt with an average recovery rate of 91.5%.