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1 UK gets tough on late payment
Larger businesses who regularly use SME suppliers face a significantly tougher late payment regime. The UK Government is consulting on major changes to the law on late payment – including powers to fine businesses which fail to pay suppliers on time and restrictions on customers' ability to withhold payment in the event of a dispute and a new arbitration system. Suppliers will also be interested in our top tips for getting paid on time.
Key proposals
Small Business Commissioner to be able to fine businesses with poor payment records or which persistently fail to comply with late payment obligations
Statutory interest rate on late payments of base + 8% to be made mandatory (i.e. no "contracting out", as at present)
Prohibition of payment periods of more than 60 days (reducing to 45 days over 5 years)
30 day deadline for disputing invoices (if customer wishes to withhold payment)
Binding arbitration scheme, administered by Small Business Commissioner, for payment disputes involving businesses with fewer than 50 staff
Large companies and LLPs to be required to report on the amount of statutory interest owed and paid out
Audit committees or company boards of large companies and LLPs to be required to make regular recommendations to improve payment practices
Read our briefing for more detail.
2 Supreme Court ruling in motor finance litigation: wider implications for agency agreements
The Supreme Court's ruling in the motor finance litigation has some significant implications for agency contracts. The litigation involved an attempt to claim that commission payments to car dealers for arranging finance amounted to secret profits. The allegation was that, as these arrangements had not been adequately disclosed, they should be paid to the consumers to whom the cars had been sold (along with the related finance packages).
The Supreme Court has now clarified the law on secret profits, explaining that it only applies where the relevant business is acting in a fiduciary capacity i.e. it owes a duty of loyalty to its principal/customer (in this case, the consumer) to disclose any gains (such as commission) that it makes by virtue of its position.
Are car dealers fiduciaries if they also offer finance?
The Supreme Court also found that car dealers offering finance are not generally fiduciaries. As a result, most of the claims in the litigation failed, although one succeeded on the basis that the finance deal breached consumer credit rules. The rationale for the Supreme Court's conclusion on fiduciaries was that the main thing that the customer expects from a car dealer is to be sold a car – the finance is secondary and unless the dealer has, for example, undertaken to go out to the market and find the best finance arrangements as well, it won't normally be regarded as a fiduciary. It is therefore free to offer finance deals in which it has a commercial interest, subject to the consumer credit rules.
Key takeaways
- Agents won't always be fiduciaries in respect of all their
activities (just as the car dealers did not owe fiduciary duties in
respect of the finance packages they offered to customers).
- Where an agent does owe fiduciary duties, commission payments
must be adequately disclosed to the principal, who might otherwise
be able to bring a claim for revenue to which the agent believed it
was entitled. These sums can be substantial. For example, had all
the claims in this case succeeded, some estimates put the sums
which would have had to be repaid across the whole sector at
£30 billion.
- Despite the failure of the secret profits claims, it is thought that around £9 billion may still need to be repaid for failure to comply with consumer credit rules – highlighting how such non-compliance can also give rise to very significant liabilities.
3 Outsourcing Spotlight – Spring/Summer 2025
In the latest issue of Outsourcing Spotlight, we look at:
- whether a possible change to equal pay rules could undermine incentives to outsource;
- the implications of the UK Government's Immigration White Paper; and
- new legislation on premises and consumer-facing outsourcings.
We also take an in-depth look at longer term outsourcings and provide a roundup of developments on contract law, AI, tech and data relevant to outsourcing.
4 Payment issues in commercial contracts: the supplier perspective
In this four-minute video, Rich Offord, Kirsty Emery and Jonathan Rush discuss what suppliers can do to make sure they get paid. Topics covered include:
- tips on how to push back against customer demands for long payment terms;
- additional protections such as parent company guarantees; and
- the value of reporting obligations to provide early warning of financial problems at the customer.
Pricing and payment video series
Other videos in our spotlight on pricing and payment series include:
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.
