Payment Practice Now a Reporting Requirement For Large Firms

As of 6 April 2017 certain large businesses are required to report on their payment practices, policies and performance.

These duties, known as the duty to report, are prescribed by two payment reporting regulations. These regulations are as follows: the Reporting on Payment Practices and Performance Regulations 2017 and the Limited Liability Partnerships Reporting on Payment Practices and Performance Regulations 2017.

Qualifying firms will now have to publish a report on their payment practices on a government website on a bi-annual basis, or face the possibility of criminal charges.

Why is this Duty Being Imposed?
The idea behind the legislation is to flush out those businesses exhibiting poor payment practices and exploiting smaller suppliers by failing to pay on time. Hampering cash flow in this way can be crippling to small businesses, stifling expansion and hindering innovation. Businesses that have a large proportion of outstanding unpaid invoices and/or a consistent pattern of disputing payments will be publicly held to account. It is hoped that the duty to report will encourage such organisations to improve their payment practices, an action that should have a cascading and positive effect on suppliers down the contract chain.

What Does the Duty Entail?
Qualifying businesses will have to report on a number of payment issues including the proportion of invoices paid within 30 days or less; between 31-60 days; and over 60 days. Details of late payment disputes also need to be provided. This information is designed to provide an insight into the businesses’ payment culture and must be approved by a company director/ designated member of the LLP before it is published.

Who is Affected?
Only “large” firms in the UK are required to comply. The requirement does not apply to Co-operative and Community Benefit Societies. “Large” businesses are companies (however incorporated including private, public and quoted companies) and LLPs, which meet two of the three following criteria:

  • Over £36m annual turnover
  • Over £18m balance sheet total
  • Over 250 employees

The payment information will be publicly available as it is published on a website provided by the government. Stringent measures are in place for failure to comply. The firm and its directors risk prosecution and/or a fine for failure to publish a report.

Is there Guidance Available?
To assist those subject to the new reporting duty, the Department for Business, Energy and Industrial Strategy published guidance in January 2017. The guidance acknowledges that “thousands of businesses experience severe administrative and financial burdens simply because they are not paid on time” and explains which businesses are subject to the duty to report and how and when to report.

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