Late payment can cause serious financial and administrative problems for businesses. New legislation requires certain large UK companies and limited liability partnerships (Businesses) to publish information on their payment practices, policies and performance for financial years beginning on or after 6 April 2017.
Which Businesses are affected?
A Business will be required to report for a financial year if its figures exceeded two of the following thresholds (updated periodically) on its last two balance sheet dates:
- £36 million (net) annual turnover
- £18 million (net) balance sheet total
- 250 employees
Businesses in their first financial year will not be required to report and Businesses in their second financial year should only refer to their balance sheet for the first financial year.
A Business with one or more subsidiaries will have to report if the aggregate group figures exceeded the above thresholds regardless of whether the parent Business own figures exceeded the thresholds.
What are the reporting deadlines?
Information needs to be reported within 30 days of the end of each of the following reporting periods:
- The 6 calendar months starting on the first day of the Business financial year; and
- The 6 month period starting on the day after the first period ends and ending on the last day of the financial year.
There will only be one reporting period for a financial year which is 9 months or shorter and 3 reporting periods for a financial year which is longer than 15 months.
What information must be reported?
Contracts meeting all of the following criteria should be reported on:
- Between 2 or more businesses
- For goods, services or intangible property
- Having a significant connection with the UK
- Not for financial services.
The following information in relation to the above contracts must be reported via a dedicated government web service:
- Narrative descriptions of:
- Standard payment terms
- Processes for resolving payment-related disputes.
- Statistics on:
- Average number of days taken to make payments
- Percentage of payments made:
- within 30 or fewer days
- between 31 and 60 days
- within 61 or more days
- outside agreed terms.
Disputed invoices must be included in these statistics.
- Confirmation of whether the Business:
- Offers e-invoicing
- Offers supply chain finance
- Is a member of a payment code and, if so, which one
- Deducts sums from payments as a charge for remaining on a suppliers list and
- Confirmation of whether it has done this during the reporting period.
What are the penalties for non-compliance?
If a Business fails to report within the 30 day period or publishes a misleading, false or deceptive report, the Business and each of its directors or members will be guilty of a criminal offence, punishable by a fine on conviction in the Magistrates’ court.
*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation.
