On 31 January 2017, the Government introduced a duty on the UK’s largest companies and LLPs to report on a half-yearly basis on their supplier payment practices for financial years beginning on or after 6 April 2017.
The information must be published through an online web service provided by the Government which general public, suppliers, and other interested parties, will be able to view immediately after it is published by a business.
The move comes after a serious of scandalous incidents surrounding supplier treatments and payment practices involving a number of high profile UK companies.
It is designed to protect smaller more vulnerable businesses which often experience significant administrative and financial burdens when they are not paid on time.
Requirement thresholds
The requirement applies only to large companies/groups and LLPs which exceed at least two of the following three criteria in their last two balance sheets:
- £36 million annual turnover
- £18 million balance sheet total
- 250 employees
A company or LLP that has one or more subsidiaries (a parent company or parent LLP) must report if both the parent itself and the group it heads are large.
The requirement applies to UK registered businesses only. Businesses incorporated outside of the UK, including overseas companies registered under the Companies Act but not formed under the Companies Act, are not required to report.
First reporting period
Businesses in scope of the requirement will first be required to report within 30 days after the end of the first half-yearly period for the financial year commencing after 6 April 2017.
For example, businesses with financial years that start on 1 January would be required to publish their first report in relation to the six months ended 30 June 2018, with the first report due in July 2018. Businesses with financial years that start on 1 July will be required to publish their first half-yearly report by the end of January 2018.
Information to be reported
For each reporting period businesses are required to report on the following, in relation to qualifying contracts:
Narrative descriptions of:
- the business’ standard payment terms, which must include – the standard contractual length of time for payment of invoices, maximum contractual payment period and any changes to the standard payment terms in the reporting period, and how suppliers have been notified or consulted on these changes;
- the business’ process for resolving disputes related to payment.
Statistics on:
- the average number of days taken to make payments in the reporting period, from the date of receipt of invoice or other notice;
- the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer;
- the percentage of payments due within the reporting period which were not paid within agreed terms.
Statements (i.e. a tick box) about:
- whether suppliers are offered e-invoicing;
- whether supply chain finance is available to suppliers;
- whether the business’ practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this in the reporting period;
- whether the business is a member of a payment code, and the name of the code.
Non-compliance
It is a criminal offence by the business, and every director of the company or designated member of an LLP, if the business fails to publish a report, containing the necessary information, or if the information the report contains is incomplete or inaccurate. These offences are punishable by a fine.
Further reading: >>> Business payment practices and performance: reporting requirements
If you feel that issues highlighted in this article are likely to affect your reporting and would like to discuss this further with one of our specialist, you can contact AVEY of London on:
Tel: 01707 691 783
Email: info@aveyoflondon.co.uk
This guidance is designed to alert to an important issue of general application. It is not intended to be a definitive statement covering all aspects of the related legislation. It is only a brief summary and no action should be taken without consulting the detailed legislation or seeking professional advice. No responsibility for any person acting or referring to act as a result of any material contained in this guidance can be accepted by AVEY of London.