Legislation intended to help small businesses punish late payers is instead being used against them by large companies seeking a reward for settling bills promptly, says an academic study.

Since November 1998, companies with 50 employees or fewer have been able to claim interest of 8 percentage points over Bank of England base rate if their customers fail to settle bills on time under the Late Payment of Commercial Debts Act. In November 2002 these powers were extended to companies of all sizes.