Late Payments Crackdown: New Fair Payment Code and Reporting Rules for Large Firms

The measures are aimed at large businesses that sit at the top of supply chains. Government research found that payment problems multiply further down the chain, with smaller firms generally experiencing more delays than larger ones.

What the package contains

• Annual report disclosure: legislation to be brought in within weeks will require all large businesses to include payment reporting in their annual reports, so that boards and investors can see how firms treat small suppliers.
• Stronger enforcement: enforcement will be stepped up on the existing duty for large companies to report payment performance twice a year on GOV.UK.
• Fair Payment Code: a new code replaces the Prompt Payment Code and opens to signatories this autumn, with gold, silver and bronze status. Businesses must show they meet good payment standards before being awarded status, and the gold award aims to make 30-day payment the standard.
• Consultation: a consultation in the coming months will consider tough new laws and further measures, and proposals on audit and audit committees will be brought forward.

The existing reporting duty

The twice-yearly reporting duty comes from the Reporting on Payment Practices and Performance Regulations 2017, which require qualifying large companies to publish information on their payment practices, policies and performance. The government noted that responsible directors at companies that fail to report can face criminal prosecution, including potentially unlimited fines.

What it means for large companies

Finance, procurement and company secretarial teams should check that their payment practice reports are complete and filed on time, and prepare for late payments data to appear in the annual report, where it will be visible to investors and lenders alongside other governance disclosures. Companies that want official Fair Payment Code status will need evidence of their payment performance. Any statutory changes following the consultation could go further, so suppliers' payment terms are likely to remain a board-level issue.

Sources

• GOV.UK: Crack down on late payments in major support package for small businesses
• legislation.gov.uk: The Reporting on Payment Practices and Performance Regulations 2017