Government decisions on prompt payments
The Government has announced its decisions on how to take forward its proposals on Prompt Payments. It intends they should be applicable across the UK by agreement with devolved legislatures.
These may be found as follows:
Press release
Time to Pay Up: Government unveils toughest crackdown on late payments in over 25 years - GOV.UK
Letter to businesses
Consultation with formal response added
Late payments: tackling poor payment practices - GOV.UK (consultation response)
While the Government is taking a strong stand on poor payment practices in the context of Context of 38 small businesses going out of business every day due to late payments and £11 billion owed - and a desire to change the culture and have as a basis for all b2b payments a UK maximum of 60 days payments- it has responded to representations made by the BRC with a number of changes to the original plans.
The BRC campaigned :
-
- against the application of 60 days to large to large contracts.
- Against any application to contracts with overseas businesses
- Against any application to contracts where the smaller party was the purchaser
- To take into account imported goods may take much longer to reach the shelves than 60 days from order
- Against a requirement for Boards and Audit Committees to sign off the report
- In favour of the SBC having more resources to ensure that all businesses were reporting accurately and that action was directed towards real persistent offenders who failed to report or reported inaccurately or were persistent late payers
- Against a deadline of 30 days to raise a dispute.
- These concerns have been substantially met by: - a presumption of 60 days for b2b payments BUT certain limited exemptions allowed
i. If both parties are large (companies Act definition) and both agree, then the 60 days can be exceeded
ii. Where the purchaser is the smaller party (booksellers) then they can agree on more than 60 days
iii. Genuine overseas contracts will be excluded
iv. Where goods are to be imported there can be agreed trigger points for the time to start including for example:
- when the goods arrive in the UK;
- when the invoice is issued;
- when the goods have been verified as meeting the order
v. Boards and Audit Committees will only need to sign off reports from persistent late payers
vi. SBC will receive more fining powers for persistent late payers and stronger investigatory powers and stronger powers to adjudicate disputes with more resources
vii. The deadline to raise a dispute has been changed to be more flexible and may be more like so many days before the payment is due.
- BRC also campaigned against automatic mandatory interest payments where a payment is late.
-
- However this will go ahead with e-invoicing from 2029 expected to make implementation easier through automatic calculation of how late the payment is (BRC still believes this needs work as there will still be debate potentially as to when late begins)
-
Our comment is:
Retailers have built strong, trusted relationships with their suppliers and have worked hard to create payment terms and processes that benefit all parties. While the Government is taking strong action, it is nevertheless clear the Government has listened to businesses, and we welcome the proposals on prompt payments which allow contracts between large retailers and large suppliers to be exempted from the 60 days requirement while continuing to provide small suppliers with advantageous terms. Furthermore, systems that would allow the payments clock to start ticking at agreed points when goods are being imported will help smooth payment operations for all parties.
“We also support additional resource for the Small Business Commissioner, so that rogue businesses that try to take advantage of small businesses can be brought to book.”