The Government has announced plans to “take forward the most ambitious legislation to tackle late payments in over 25 years”, following the publication of its response to a recent consultation on the subject.

We have already commented here on a series of measures that have been introduced by the Government to tackle what it describes as the “scourge of late payments”. The scale of the problem is set out in the Government’s response to the consultation, as it is estimated that late payments annually cost the UK economy close to £11 billion and lead to the closure of 14,000 businesses.

To address the “urgent need to tackle late payments”, the Government will introduce new legislation which will include the following:

• Additional powers for the Small Business Commissioner to: (a) investigate businesses suspected of poor payment practices; (b) settle payment disputes outside of the court process; and (c) fine businesses.
• A requirement for board or audit committees of persistently late-paying large companies to publish an account of why their performance is so poor and what actions they are taking to address it;
• A maximum payment term of 60 days with limited exemptions;
• A statutory time limit for disputing invoices; and
• A requirement that all commercial contracts contain a right to statutory interest at 8% above the Bank of England base rate.

To prepare businesses for the upcoming measures, the Minister for Small Business and Economic Transformation has written an open letter calling on them to ensure that:

1. Payment terms with suppliers are a maximum of 60 days, unless the limited exemptions apply;
2. All suppliers are paid on time and payment systems are “ready to track and pay interest on all late payments”;
3. Payment performance is reported twice yearly, as required for large companies under the Reporting on Payment Practices and Performance Regulations 2017; and
4. Payment performance headlines are included in the annual report (a requirement introduced earlier this year and discussed here).

The new measures will be introduced under primary and secondary legislation “when parliamentary time allows”.

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