Introduced by the UK government, the Breathing Space Scheme gives individuals temporary relief from debt-related pressure. It aims to give people the time and legal protection needed to stabilise their finances without the added stress of enforcement action or rising interest. During this period, creditors must pause contact and stop adding charges to qualifying debts.
While this initiative supports vulnerable individuals, it also creates uncertainty for businesses waiting for overdue payments. Many UK firms are left wondering how they can manage their financial flow when legal action and recovery efforts are restricted.
What does this mean for businesses trying to recover debts? In this article, we’ll explore how the Breathing Space Scheme affects commercial debt collection and what steps companies can take to protect their financial position while staying compliant with the law.
2 Types of Breathing Space Scheme
The scheme has two distinct types:
1. Standard Breathing Space
This type gives individuals 60 days of relief from most debt collection activities. During this time, creditors must freeze interest, fees, and enforcement. To qualify, the person must seek advice from an approved debt adviser, who will determine whether Breathing Space is appropriate.
2. Mental Health Crisis Breathing Space
This option applies to individuals receiving mental health crisis treatment. It lasts as long as the treatment continues, plus 30 additional days. Unlike the standard version, it doesn’t require debt advice before starting. A certified mental health professional must confirm the individual’s eligibility.
Both the aforementioned require creditors to pause recovery efforts once notified.
Which Debts are Covered by the Breathing Space Scheme
Not all debts fall under the protections offered by the Breathing Space Scheme. Firms need to understand which debts qualify so they can respond correctly when notified and adjust their credit control approach accordingly.
Covered debts include:
- Credit cards
- Personal loans
- Overdrafts
- Utility bills (e.g., gas, electricity, and water)
- Rent arrears
- Council tax
- Benefit overpayments
Business debts can also qualify, but only if the individual is a sole trader and the debt relates to their business activities. In this case, the debt is treated as personal because it is not linked to a limited company.
Limited companies and partnerships are not eligible for Breathing Space. This means that if your business supplies goods or services to a limited company, the scheme does not apply, and debt recovery can continue as usual.
However, B2B transactions involving sole traders may fall under the scheme. If a sole trader enters Breathing Space, the business must pause recovery action for the duration of the period.
For UK companies, it’s vital to check the legal status of the debtor before taking any steps. This helps avoid non-compliance and supports better decision-making around credit control and collections.
How the Breathing Space Scheme Impacts Debt Recovery
As mentioned, when a customer enters the Breathing Space Scheme, organisations must adjust their standard debt recovery processes and timelines to comply with legal requirements. The effects can be significant, particularly for firms dealing with sole traders or individual clients:
- Legal Action Paused – Creditors must stop any court proceedings or enforcement actions related to the covered debt.
- Interest and Charges Frozen – Additional fees, interest, or penalties on qualifying debts must stop during the Breathing Space period.
- No Contact for Payment – Businesses cannot contact the debtor to request payment, either directly or through agents.
- System and Process Adjustments – Credit control teams need to flag and manage affected accounts differently to avoid non-compliance.
- Delayed Cash Flow – Recovery is paused for up to 60 days, which can impact financial planning and liquidity.
Firms should stay informed and adapt quickly when a Breathing Space notification is received.
What UK Businesses Can Still Do
Although the Breathing Space Scheme limits debt recovery actions, businesses are not entirely without options. There are still important steps firms can take to stay prepared and protect their position during the pause period:
- Communicate Professionally – Businesses may still contact the debtor to discuss non-payment-related matters, such as ongoing services or account updates.
- Maintain Accurate Records – Keep detailed notes and update internal systems to flag accounts affected by Breathing Space. This avoids accidental contact or charges.
- Plan Ahead – Use the pause period to prepare your next steps. Once the 60 days end, you can resume recovery efforts based on the debtor’s status.
- Seek Expert Advice – If you’re unsure about your rights or obligations, speak to a debt recovery specialist or legal advisor.
Need help managing debts affected by Breathing Space? Get in touch with Slater Byrne Recoveries UK for clear, professional support tailored to your business.
