The Government's Late Payments Consultation – Just over a week to go until the consultation closes

Late payments

Where businesses fail to pay an invoice within the agreed payment terms (30 days where no specific terms have been agreed)

Long payment terms

Where payment terms are agreed over extended periods beyond 60 days

Disputed payments

Where businesses disagree over the goods or services supplied and payment is delayed or reduced

Unfair practice around retention payments

Specific to the construction sector – where retained money can be lost through upstream insolvency or subject to late, partial or non-payment

Mandatory board-level scrutiny and audit-committee oversight of large companies’ payment performance to increase executive responsibility

The Government believes that further positive change can be achieved by increasing the scrutiny of large companies’ payment practices at board level.

In September 2024, it reaffirmed its commitment to legislate on audit committees and board level responsibilities to improve payment practices.

The Government seeks ideas to encourage greater discussion of payment practices at board level. Examples it gives include, where companies have them:

1. ensuring that audit committees or company boards provide commentary and make recommendations regarding payment performance to company directors before the data is submitted to government and included in the director’s report.

This would include data provided as part of the Reporting on Payment Practices and Performance Regulations 2017, and any interest on late payment liabilities.

2. ensuring that the Small Business Commissioner (SBC) writes to audit committees and company boards when (1) undertaking payment performance reporting assurance and (2) when investigating any other matter relating to a companies’ payment practices.

Introduction of maximum payment terms to limit how long suppliers can be paid

Amending The Late Payment of Commercial Debts (Interest) Act 1998 to remove the exemption that allows businesses to agree to payment terms longer than 60 days if considered not "grossly unfair".

This measure would limit payment terms between UK businesses to 60 days.

Subject to further consultation, this policy may subsequently reduce the time limit from 60 days to 45 days, after 5 years.

A fixed deadline for disputing invoices to discourage prolonged withholding of payment during alleged disputes

Amending The Late Payment of Commercial Debts (Interest) Act 1998 to introduce a 30-day invoice verification period; businesses that wish to raise a dispute will need to do so within 30 days of receiving an invoice, otherwise they will be liable to pay the invoice in full within the agreed payment terms, alongside any statutory interest or debt recovery costs if the invoice is paid late.

Mandatory statutory interest for late payments to suppliers can recover interest without court action

Amending The Late Payment of Commercial Debts (Interest) Act 1998 to make the statutory interest rate payable on late payments mandatory.

This measure would remove the ability to negotiate compensation rates lower than the statutory rate and increase existing financial incentives to pay invoices on time.

Additional reporting requirements on statutory interest to increase disclosure when interest is charged or owed

Amending The Reporting on Payment Practices and Performance Regulations 2017 to include additional reporting requirements around statutory interest liabilities.

This measure would further increase transparency around poor B2B payment behaviour and inform other policies that aim to improve the utilisation and payment of statutory interest.

Financial penalties for persistent late payers

Introducing new legislation to give the SBC powers to issue financial penalties to businesses that persistently pay their suppliers late.

This measure would use payment behaviour data submitted by businesses under The Reporting on Payment Practices and Performance Regulations (2017).

Expanded powers for the Small Business Commissioner, including access to and assurance of payment reporting data to strengthen oversight and supplier support

Amending The Enterprise Act 2016 to give additional powers to the SBC that would improve the SBC’s ability to conduct investigations into poor B2B payment behaviour (beyond its current complaints scheme) and allow it to provide legally binding arbitration in disputes, and impose financial penalties or make arbitration awards after an investigation or arbitration process.

This measure would also enable the SBC to investigate the accuracy of the payment reporting data that large businesses provide under The Reporting on Payment Practices and Performance Regulations 2017 which would also improve the quality of reporting data and support the reporting regulations original objectives of improving transparency around B2B payment behaviour.

Use of retention clauses in construction contracts

Amending Part II of the Construction Act to either

1. prohibit the use of retentions; or
2. introduce requirements to protect retention funds deducted and withheld from insolvency and late or non-payment.