New rules to tackle poor payment practices

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For financial years beginning on or after 6 April 2017, large companies and Limited Liability Partnerships (LLPs) will have to report half-yearly on their payment practices in order to reveal how long they are taking to pay their suppliers

This is meant to help ensure that small and medium sized businesses (SMEs) are paid on time.

The reports will have to be made on a portal at www.gov.uk within 30 days of the end of each reporting period, and must be approved by a director before submission. Suppliers will be able to search the reports.

No company will have to make a report in its first financial year.

According to the government, UK SMEs are owed more than £26bn in overdue payments, with over half these SMEs experiencing problems with late payment. Bringing more transparency to the issue is expected to name, shame and change the behaviour of the worst payers.

The new reporting requirement is brought about by the Small Business, Enterprise and Employment Act 2015 and the Limited Liability Partnerships Act 2000. The requirement is introduced in advance of the appointment of a Small Business Commissioner who will oversee payment practices.

Who has to report?

The report has to be made by those businesses which exceed at least two of the following criteria on their last two balance sheet dates:

  • £36 million turnover
  • £18 million balance sheet total
  • 250 employees.

What is reported on?

The report that has to be made will have to cover the following:

  • Standard payment terms and the process for resolving payment disputes
  • Data on the average number of days taken to make payments in the period
  • The proportion of payments made within 30, between 31-60 days, and 61 days plus
  • The proportion of payments due in the period which were not paid on time
  • Whether suppliers are offered e-invoicing and if supply chain finance is available
  • Details of any charges made for being on a supplier’s list
  • Details of any payment code observed, including the Prompt Payment Code.

The Department for Business, Energy and Industrial Strategy has published guidance for companies and LLPs to help them comply with the rules.

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