Large UK companies become subject to payment-reporting rules on April 6, 2017, intended to help smaller suppliers check how customers pay. The Reporting on Payment Practices and Performance Regulations apply to qualifying financial years beginning on or after that date. They require public reports on payment terms and performance, rather than immediate payment of outstanding bills. The government’s stated aim is to give suppliers better information when choosing customers and negotiating contracts. [S1][S2]
The duty is aimed at larger companies, not every shop or wholesaler. The general test uses three thresholds: £36 million in annual turnover, an £18 million balance sheet total and an average of 250 employees. An established company must exceed at least two on both relevant preceding balance-sheet dates. Parent companies also face a group-size test. A company’s first financial year is exempt, while its second uses one preceding balance-sheet date. The reports concern qualifying business contracts; contracts for financial services are excluded. [S1][S2]
April 6 is not a deadline for every company to publish its first figures. In a normal financial year, the first reporting period covers six months and the second covers the remainder, with reports due within 30 days after each period ends. A director must approve the information before it appears on the government’s reporting service. Shortened or extended accounting years have different reporting-period rules. The business department says it settled on twice-yearly rather than quarterly reporting after consultation responses argued that quarterly reports would add work without adding value. [S1][S2]
Suppliers will need to read two different measures together. For payments made during a reporting period, companies must disclose the average time taken and the shares paid within 30 days, in 31–60 days and after 60 days. That clock starts the day after receipt of the invoice or other notice of the amount owed. Separately, companies must report the share of payments falling due during the period that were not made within the contractual payment period. These figures answer different questions: how long completed payments took, and how often amounts due missed their agreed deadline. A payment can take more than 30 days without breaching its contract. [S1]
Companies must describe standard payment terms, changes to those terms and any supplier notification or consultation, as well as their payment-dispute process. They must say whether electronic invoice submission and tracking and supply-chain finance are available. They must also disclose whether their policies allow deductions from payments as a charge for remaining on a supplier list, and whether they made such deductions during the period. For a supplier comparing customers, those details identify practical questions that an average payment time cannot answer. [S1]
Producing the figures brings work for buyers too. The government’s explanatory memorandum identifies changes to IT systems and processes, information gathering, and preparation and approval of reports as compliance costs. The department expects public scrutiny to encourage faster payment. The rules establish disclosure obligations; they do not show that a customer has changed its behaviour or that a particular supplier will receive cash sooner. [S1][S2]
Source documents
- The Reporting on Payment Practices and Performance Regulations 2017 — original as madehttps://www.legislation.gov.uk/uksi/2017/395/pdfs/uksi_20170395_en.pdf
- Explanatory Memorandum to the Reporting on Payment Practices and Performance Regulations 2017https://www.legislation.gov.uk/uksi/2017/395/pdfs/uksiem_20170395_en.pdf