Government announces decisions on Prompt Payments

The Government has announced its decisions on how to take forward its proposals on Prompt Payments in legislation. It intends they should be applicable across the UK by agreement with devolved governments.

The Government is taking a strong stand on poor payment practices in the context of its assessment of 38 small businesses going out of business every day and outstanding bills of £38 billion. It also wishes to change the overall culture and have 60 days as the basis for all b2b payments in the UK. 

However, it has responded to business representations by the BRC with a number of changes to its original plans.

The BRC campaigned:

• Against the application of 60 days to large to large business 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 than 60 days from placing the order to reach the shelves
• Against a requirement for Boards and Audit Committee to sign off all reports
• In favour of the Small Business Commissioner having more resources to ensure that all businesses are reporting, are reporting accurately and that action is directed towards real persistent offenders in terms of reporting or late payments.
• Against a fixed deadline of 30 days to raise a dispute

These concerns have been substantially met and are set out in the response or we have been advised by officials will be included in legislation or subsequent Regulations

• If both parties are large (Companies Act definition) and both agree, then the 60 days can be exceeded
• Where the purchaser is the smaller party (eg booksellers) then the parties can agree on more than 60 days
• Genuine contracts with overseas suppliers will be excluded - only UK to UK businesses are to be covered by the proposals
• Where goods are to be imported in a contract, there can be agreed trigger points for the time against which payments are calculated to start such as: when the invoice is issued; when the goods have arrived in the UK; when the goods have been delivered; when the goods have been verified as meeting the order
• Boards and audit committees will only need to sign off reports and give explanations in the case of persistent late payers (probably 25% of payments made late)
• SBC will receive more fining powers for persistent late payers; stronger investigatory powers; and stronger powers to adjudicate disputes
• The deadline to raise a dispute will be more flexible than a fixed 30 days - such as x days before the payment is due.

The BRC also campaigned against automatic mandatory interest payments for late payments but these will still go ahead with the Government expecting e-invoicing to assist in 'automatically' detecting when a payment is late.

The Government press release can be downloaded together with a letter to business leaders from Minister Mcdougall

The formal response can be found at 

https://www.gov.uk/government/consultations/late-payments-tackling-poor-payment-practices