What could this mean for your business?
Late payments remain a major challenge for UK businesses, costing the economy an estimated £11 billion every year. After consulting from July to October last year, the government has now published its response setting out a range of proposed measures aimed at improving payment practices.
So, what’s being proposed, and how might it affect you?
Will the Small Business Commissioner have more power?
Yes. One of the key proposals is to significantly expand the role of the Small Business Commissioner. Under the plans, the Commissioner would be able to:
- Investigate businesses suspected of poor payment practices or inaccurate reporting
- Resolve payment disputes without the need for court action
- Fine businesses that persistently pay suppliers late or fail to comply with late payment legislation, including substantial fines for large companies
The aim is to strengthen enforcement and provide businesses with a faster, more practical way to address payment issues.
Are maximum payment terms being introduced?
In most cases, yes. The government plans to introduce maximum payment terms of 60 days, with only limited exceptions.
In addition, all commercial contracts would need to include a right to statutory interest, set at 8% above the Bank of England base rate. This would give suppliers clearer legal protection where payments are delayed.
When will invoice disputes need to be raised?
A statutory deadline is being proposed for raising invoice disputes. If a dispute isn’t raised within the set timeframe, compensation would become payable. This is designed to reduce uncertainty and prevent invoices being delayed late in the payment process.
Will late‑paying companies face greater scrutiny?
Yes. Large companies that are persistent late payers would be required to increase transparency at board level.
Their boards or audit committees would need to publish a statement explaining:
- Why payment performance is poor
- What steps are being taken to improve it
This measure is intended to drive accountability and improve payment behaviour from the top.
What about retention payments in construction?
For businesses in the construction sector, a significant change is proposed. The government intends to ban the practice of deducting and withholding retention payments under construction contracts—a move that could have a major impact on cash flow for contractors and subcontractors.
What happens next?
The government has stated that it intends to legislate as soon as Parliamentary time allows.
Until then, it’s worth reviewing your current payment practices and protections. Our accompanying blog outlines three practical steps you can take now to help reduce late payments. And, if you’d like tailored advice or support, please do get in touch we’d be happy to help.
