In April 2017 new regulations come into force, which aim to increase transparency and speed up payments to small suppliers.
All larger UK businesses will have to report twice a year on the speed at which they pay smaller suppliers and provide details of their payment practices and policies. The information will be published online by the government.
The Federation of Small Business (FSB) has long campaigned for changes to the late payment culture in the UK believing that up to 50,000 businesses fail each year due to late payments.
The government has taken on board the FSB’s campaign believing that late payment practice limits the ability of small businesses to grow.
Which companies are under a duty to report?
The duty applies to all individual companies and LLPs who exceeded at least two of three thresholds on both of their last two balance sheet dates.
The thresholds are:
- Over £36 million turnover;
- Over £18 million balance sheet; or
- Over 250 employees.
The duty will therefore apply to a significant number of businesses in the UK – including Gateley PLC!
Will the change have a positive effect?
The FSB and the government hope that the changes will lead to significant changes of practice and the speeding up of payments to smaller businesses allowing them to thrive.
It remains possible that larger businesses will become aware that they are paying invoices quicker than the rest of their sector, which could inadvertently lead to the slowing down of payment of invoices.
The information may also be of interest to IPs and creditors. It could, for example, be used to evidence a company’s inability to pay its debts as they fall due or as evidence of insolvency in actions for wrongful trading or misfeasance by directors.
We will continue to monitor the position with interest.