13 April 2015
Government Confirms Duty on Large Companies to Report on Payment
Minister of State for Business and Enterprise Matthew Hancock MP announced in a written statement to Parliament on 20 March 2015 that large companies will be required to report on their payment practices from April 2016.
This follows a consultation earlier this year and the publication of the summary of responses last month which revealed there was general support for the proposed areas to be reported on. Government is now developing the secondary legislation, IT systems and guidance needed to effectively implement the requirements and it intends to lay the secondary regulations early in the next Parliament.
Defining Large Companies
As supported by the majority of responses to the consultation, the reporting duty will cover large private companies, large LLPs and large quoted companies and the definition of ‘large’ is determined by the Companies Act. Companies will be required to report if they satisfy two or more of the following conditions:
• Turnover – £25.9 million or more
• Balance Sheet Total – £12.9 million or more
• Number of employees – 250 or more.
The Reporting Requirements
Large companies will be required to report on the following:
• standard payment terms, including any changes to these in the last reporting period
• average time taken to pay
• proportion of invoices paid beyond agreed terms
• proportion of invoices paid in 30 days or less, between 31 to 60 days, and over 60 days
• amount of late payment interest owed and paid
• the availability of e-invoicing, supply chain finance and preferred supplier lists
• whether financial incentives are required to join or remain on supplier lists
• dispute resolution processes for overdue invoices
• membership of a Payment Code, such as the Construction Supply Chain Payment Charter.
Government has published a sample report which is available on the Gov.uk website.
Frequency of Reports
In order to strike a balance between proportionate reporting obligations and up to date data, Government has confirmed that it will require reporting on a half-yearly basis. Large companies will have to submit reports in an open data format, which can be accessed free of charge, to a dedicated website.
Matthew Hancock MP said:
“Tackling late payment is at the heart of our drive to help small businesses…The Government is absolutely clear that large companies should lead by example in paying their suppliers promptly and fairly, with 30 day terms the norm and 60 days the maximum…These proposals will allow organisations with good payment records to highlight and celebrate their payment performance, whilst raising public awareness and scrutiny of poorer payers. This has the potential to cause a fundamental shift in the payment performance of the UK’s large organisations.”