Government tackles late payments to small firms in new reforms
The government has announced an overhaul of the Prompt Payment Code to crack down on delayed invoices owed to small businesses.
Under new reforms, companies that have signed up to the Prompt Payment Code will be obliged to pay small businesses within 30 days – half the time outlined in the current code.
The changes coming into effect immediately are:
- requiring a company’s CEO or finance director, or the business owner where it is a small business, to personally sign the code to ensure responsibility for payment practices is taken at the highest level of an organisation;
- introducing a new logo for signatories to use in external communications to show their commitment to the code, making it more damaging to a company’s reputation to breach it;
- acknowledgement as a condition of signing the code that suppliers can charge interest on late invoices; and
- enabling administrators of the code to investigate breaches based on third-party information.
In addition, the new requirement for signatories to pay 95 per cent of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021. The target for larger businesses will remain 95 per cent of invoices within 60 days.
The government said the reforms will help to build a culture of prompt payment between companies and challenge UK businesses to change their practices and stand by small partners at a critical time for the UK’s economic recovery.
“Our incredible small businesses will be vital to our recovery from the coronavirus pandemic, supporting millions of livelihoods across the UK,” said Small Business Minister Paul Scully.
“Today, we are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.
“By signing up to the Prompt Payment Code and sticking to its rules, large firms can help Britain to build back better, protecting the jobs, innovation and growth which small businesses drive right across the UK.”