On 6th April 2017, large companies and Limited Liability Partnerships (LLPs) will be subject to a mandatory duty to report twice yearly on their payment practices. The intention is to encourage transparency in order to allow SME suppliers to evaluate the payment practices of those they are considering supplying.
What is the Duty?
To publish a report on their payment practices through an online service provided by the government, which will be available to the public. The report must include:
- Your standard payment terms;
- Process payment dispute resolution;
- Average number of days taken to pay invoices;
- Percentage of invoices paid within the reporting period;
- Percentage of invoices that were due within the reporting period but not paid within the payment period; and
- Whether you are a signatory to a code of conduct or standards on payment practices.
Who is subject to the Duty?
The mandatory duty to report will apply to “large” UK companies and LLP’s that exceed two or all of the thresholds set out below on both of its last two balance sheet dates:
- A turnover in excess of £36m;
- A balance sheet total in excess of £18m; and
- More than 250 employees.
What are the obligations?
- Businesses in scope of the reporting requirement (see pages 4-9) must prepare and publish information about their payment practices and performance in relation to qualifying contracts (see paragraphs 34-39), for each reporting period in the financial year. The information for each reporting period must reflect the policies and practices which have applied during that period, and the business’s performance for that period.
- The report must be published on a web-based service provided by or on behalf of government within 30 days of the end of the reporting period.
- The report must contain the information required by the regulations and must be approved by a named company director or (for LLPs) a designated member.
What are the sanctions if a business does not comply?
- 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, within the specified filing period (30 days).
- Anyone who publishes a report or information (this could be an individual or a business), or makes a related statement, which is misleading, false or deceptive, commits a criminal offence if they knew or were reckless about it being false or misleading.
- These offences are punishable on summary conviction (in the Magistrates’ court) by a fine.