The Department for Business and Trade has published a response to the Late Payments Consultation, which sets out the legislative measures the Government intends to take forward. Late payments cost the UK economy £11bn per year and closes 38 UK businesses every day.
Measures include:
- Small Business Commissioner (SBC) powers
- Power to investigate: to provide the SBC with the power to investigate businesses suspected of poor payment practices or inaccurately reporting payment performance.
- Power to adjudicate: to provide the SBC with the power to settle payment disputes outside of the court process.
- Power to fine: to provide the SBC with the power to fine businesses, including significant potential fines for large companies that persistently pay their suppliers late or fail to comply with late payment legislation.
- Wider later payment measures
- Board-level scrutiny of payment practices: to introduce a requirement for the boards or audit committees of any persistently late-paying large company to publish commentary on why payment performance is poor and what actions they are taking to fix this.
- Maximum payment terms: to impose maximum payment terms of 60 days, with strictly limited exemptions, to ensure that smaller businesses are paid in a maximum of 60 days.
- Deadline for disputing invoices: to introduce a statutory time limit for raising disputes. Businesses that do not raise disputes within the time limit will need to pay compensation to their supplier.
- Mandatory interest on late payments: to make it a requirement that all commercial contracts will contain a right to statutory interest at 8% above the Bank of England base rate.
- Retention payments under construction contracts
- Prohibition of retention payments: to ban the practice of deducting and withholding of retention payments under the terms of a construction contract, consulting on its implementation.
The consultation response and supporting impact assessment can be found here.
The press release can be found here.
