UK: New UK Reporting Requirements On Payment Practices For Large Businesses

Under new rules that came into effect in the UK on 6 April 2017, certain large companies and large limited liability partnerships (LLPs) will be required to regularly publish public reports on their payment practices and policies.


  1. The duty to publish a report on payment practices and performance is imposed by new regulations1 in the UK (the "Regulations"). 
  2. The Regulations are directed at large businesses in the UK but overseas businesses with eligible UK subsidiaries may also be affected.
  3. Eligible businesses will have to publish information in relation to their supplier contracts, payment terms, applicable dispute resolution procedures and payment lead times.
  4. Failure to comply with the Regulations is a criminal offence and both an eligible business and its directors or designated members may be liable.
  5. The Regulations are an attempt to create a more responsible payment culture and are in step with other recent legislative developments in the UK and Europe more generally, including the UK Modern Slavery Act 2016 and the Companies, Partnerships and Groups (Accounts and Non-Financial Reporting) Regulations 2016, which are intended to enhance the consistency and comparability of certain non-financial information disclosed by large businesses. On 6 April 2017, the UK also implemented a mandatory Gender Pay Gap Reporting Regime.'

Is your business affected by the Regulations?

Broadly speaking, a business will be covered by the Regulations and required to deliver a report if:

  • it is an individual company (whether private, public or quoted) that is incorporated or registered in the UK, or an LLP and;
  • it has exceeded at least two of the thresholds below on both of its last two balance sheet dates:
    • £36 million+ annual turnover
    • £18 million+ balance sheet total
    • 250+ employees

The Regulations also apply slightly modified thresholds to parent companies and parent LLPs (i.e., companies and LLPs that have one or more subsidiaries). Each applicable company or LLP within a group will need to report separately.

What if your business is outside the UK?

Companies and LLPs incorporated outside the UK, including overseas companies that register a UK establishment, are generally excluded from the reporting requirements.  However, if an overseas business has a UK-incorporated subsidiary that meets the required thresholds, such subsidiary would be required to comply with the reporting requirements of the Regulations.

What are the reporting requirements?

Eligible businesses must publish information about their payment practices and policies in relation to certain qualifying contracts including the following:

  • details of their payment terms;
  • details of dispute resolution processes relating to payments;
  • statistics on their average time taken to pay invoices; and
  • statements on their capacity to provide e-invoicing supply chain financing and other payment policies.

Qualifying Contracts

Qualifying contracts are contracts for goods, services or intangible assets, including intellectual property, which are connected to the carrying on of a business and have a significant connection with the UK. Whether a qualifying contract has a significant connection with the UK will depend on the circumstances. However, there are certain indicators which help determine such significant connection including whether a contract is performed in the UK or governed by UK law (i.e., the law of England and Wales, Scotland or Northern Ireland). The Regulations do not cover business to consumer contracts and contracts for financial services.

When to report?

Eligible businesses will generally be required to publish a report on their payment practices twice a year unless they have shortened or extended their accounting period. The first report will be due within 30 days after the end of the first reporting period for that financial year. For example, if an eligible business's financial year starts on 6 April 2017, the first reporting period will be from 6 April to 5 October 2017, and the first report will have to be published on or before 4 November 2017.

Where to report?

Eligible businesses are obliged to publish required information on a UK government website (which has not yet gone live at the time of publication) and may also voluntarily choose to publish the report on their corporate website.

Who must sign the report?

The report has to be signed by a named director of the eligible business (or a designated member, where the eligible business is an LLP).

What are the consequences of non-compliance?

The Regulations provide that failing to report or publishing false or misleading information is a criminal offence. Both the eligible business itself and its directors or designated members may be liable to a fine on summary conviction; however, directors and designated members have a defence if they can show that they took all reasonable steps to ensure that the requirements under the Regulations were met.

What are the practical next steps for businesses?

  1. Businesses should acquaint themselves with the new Regulations and assess whether they or members of their group need to comply with the reporting requirements of the Regulations.
  2. Eligible businesses do not need to publish anything straight away, but those with financial years that start on 6 April 2017 will be among the first required to publish, with reports due on or before 4 November 2017.
  3. Eligible businesses may wish to begin updating their processes and policies to identify qualifying contracts necessary for inclusion in their payment practices report.
  4. Eligible businesses should consider the approval process that they will adopt for the report prior to signing a named director or designated member.
  5. Businesses may also want to implement processes that will allow easy compilation of data, e.g., to make it easier to track the date of receipt of invoices from suppliers and other information needed for the report.


1 The Reporting on Payment Practices and Performance Regulations 2017 for companies formed under the UK Companies Act 2006, and the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 for LLPs.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Alistair Maughan
Mercedes Samavi
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