On the 6th April 2017, new regulations for large businesses were introduced. These regulations require businesses that meet a certain criteria to submit half-yearly reports on their payment practices, policies and performance.
This has been introduced in an effort to tackle poor payment practices that have been a significant issue amongst UK businesses. Guidance published by the Department for Business, Energy and Industrial Strategy states that thousands of business each year ‘experience severe administrative and financial burdens’ because they are not paid on time by customers.
SMEs can be particularly affected by late payments, and over the past few years many large businesses have come under fire for exploiting their power over small businesses with regards to extending payment terms, late payments and demanding discounts from suppliers. An FSB report found that 61% of small businesses are paid late by large businesses, with an average of £6,142 owed to SMEs in late payments.
Businesses will begin reporting on payment practices if they have met two or more of the following criteria on their last two balance sheet dates:
According to the Government report, the thresholds will be updated periodically.
For companies within their first financial year, they are not required to report; however, from their second year (if they meet the criteria) they should refer to first year financials in their report.
The reporting itself must be published on a web-based service within 30 days of the end of the reporting period, the report must contain all information required by the regulations and approved by a named company director, or in the case of LLPs, a designated member.
If a business that meets the criteria for reporting fails to do so adequately, it will be considered a criminal offence for the business and every Director or designated member of an LLP. Any report submitted that is knowingly misleading, false or deceptive will also be treated as a criminal offence. Both incidences are punishable with a fine.