Duty on large companies to report on payment practices and policies
Regulations made under section 3 of the Small Business, Enterprise and Employment Act 2015 (and, for limited liability partnerships (LLPs), the Limited Liability Partnerships Act 2000), introduce a duty on the UK’s largest companies and LLPs to report on a half-yearly basis on their payment practices, policies and performance for financial years beginning on or after 6 April 2017. The information must be published through an online service provided by the government, and will be available to the public
Which companies will this affect?
Businesses are in scope of the requirement for a financial year if, on their last two balance sheet dates, they exceeded two or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006 (section 465 (3)). The thresholds relate to turnover, balance sheet total and average number of employees:
At the time of publication, these thresholds are:
• £36 million annual turnover
• £18 million balance sheet total
• 250 employees
What are the reporting requirements on large companies?
Every six months large business will have to publish the following information:
- standard payment terms, including any changes to these in the last reporting period. The government intends providing guidance to further clarify the expectations of companies in circumstances where they have different standard terms for different kinds of products
- average time taken to pay
- proportion of invoices paid beyond agreed terms
- proportion of invoices paid in 30 days or less; paid between 31 to 60 days; and paid beyond 60 days. The government will, however, not require reporting on the proportion of payments between 61 to 120 days and beyond 120 days, because it believes that all payments beyond 60 days represent bad practice. This is why we they recently introduced a maximum 60 day payment term in the voluntary Prompt Payment Code
- amount of late payment interest owed and paid
- whether financial incentives were required to join or remain on supplier lists
- dispute resolution processes
- the availability of: e-invoicing; supply chain finance; preferred supplier lists
- membership of a Payment Code
The companies under the duty will need to provide the data in open data format to a single central digital location. The government will work with stakeholders to design and implement a system of reporting.