A new duty is to be introduced from April 2017, requiring large
businesses to publish information on their payment practices and
performance twice a year.
Why is the duty being introduced?
According to government figures, small and medium sized
businesses were owed around £26.8 billion worth of late
payments as of June 2015. The government is aware of the
harmful effects that late payment can have on smaller businesses
and is therefore taking action to create a more responsible payment
The government's objective of introducing the new reporting
duty is to make payment behaviour a reputational boardroom issue
which will allow poor payment practices to be publicly exposed and,
as a result, encourage such practices to improve.
What businesses must comply with the new duty?
The duty will apply to large companies and large limited
liability partnerships that have met two or more of the following
criteria on both of their last two balance sheet dates:
over £36 million annual
over £18 million balance sheet
over 250 employees.
To fall within the reporting duty, parent companies or limited
liability partnerships which head large groups will only be
required to report if they qualify as 'large' in their own
right. Each business in scope will be required to publish its
own individual and non-consolidated reports.
What will affected businesses need to do in order to comply
with the duty?
Affected businesses will be required to publish certain
information on their payment practices and policies in relation to
business-to-business contracts which have a significant connection
with the UK. The information will require to be published
twice a year on a web-based service provided by the government.
Each business will be required to publish the following
Narrative descriptions of the
organisation's payment terms and process for dispute resolution
Statistics on, amongst other things,
the average time taken to pay invoices from the date of receipt and
the percentage of invoices paid within 30 days or less, 31-61 days
and over 60 days (within the reporting period); and
Statements on, amongst other things,
whether the organisation offers e-invoicing and supply chain
finance and whether the organisation's practices and policies
cover deducting sums from payments as a charge for remaining on a
supplier's list and whether they have done this during the
Failure to report, or to publish false or misleading
information, will be a criminal offence for which both the company
and its directors will be liable to a fine on summary
When does the duty begin?
The government intends for the duty to apply to financial years
beginning on or after 6 April 2017. Businesses will be
required to report twice a year, with the first report to be
published within 30 days after the end of the first six months of
the financial year and the second report to be published within 30
days after the end of the financial year.
What should affected businesses do now?
Whilst the duty is not yet in force, affected businesses that
will be subject to the new reporting duty should review their
payment systems and processes now and ensure that they have
appropriate systems in place to gather the data they will need to
submit their first report.
Businesses should also take this opportunity to scrutinise their
payment policies and practices in the light of the increased
transparency which will come about as a result of the new
disclosure requirements. Those businesses that already
operate good payment practices may look to utilise their first
report to publicise their positive record.
Businesses that consider their payment performance to be
unsatisfactory may consider whether an explanation of any
mitigating circumstances can be included in the report to add
context and help to minimise the likelihood of any reputational
issues following publication of their report.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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