- 22 Oct 2024
- •
- 2 min read
Government plans to tackle late payments to small businesses: is your organisation ready?
On 19 September 2024, the UK government announced an array of measures aimed at addressing the ongoing issue of late payment of suppliers by large businesses, which disproportionately affect small businesses and the self-employed. Research indicates that 52% of small and midsize enterprises (SMEs) in the UK experience late payments every quarter.
The proposed package of measures includes the following key actions:
- Fair Payment Code: Replacing the current Prompt Payment Code, this new code will launch in the autumn. Businesses seeking official recognition under the new code must meet specific payment standards. To achieve:
- Gold: 95% of all suppliers must be paid within 30 days.
- Silver: 95% of small business suppliers must be paid within 30 days, and all other suppliers within 60 days.
- Bronze: 95% of suppliers must be paid within 60 days.
- Mandatory payment reporting: New legislation will require all larger businesses to include payment reporting in their annual reports, promoting transparency and accountability in how they treat small firms.
- Increased enforcement: Stricter enforcement of existing lawswill target businesses that fail to comply with payment performance standards. Directors of non-compliant companies could face criminal prosecution, including potentially unlimited fines and criminal records.
- Updated guidance: The government will issue revised guidance on business payment practices and reporting obligations.
The government believes that these measures will improve cash flow for small businesses, giving them the confidence to invest in hiring, wages and exports instead of chasing overdue payments. This initiative also aligns with the government’s broader goal of driving economic growth.
Large businesses should stay alert for upcoming consultation to assess how these changes may impact them.
Read the government’s full announcement here: Crack down on late payments in major support package for small businesses – GOV.UK (www.gov.uk)
Disclaimer
This information is intended for general informational purposes only and does not constitute legal advice. We recommend seeking professional advice before taking any action on the information provided. If you would like to discuss your specific circumstances, please feel free to contact us on 0800 2800 421.
