IPA welcomes Govt’s new late payment law plans
Under the proposed plans (which can be viewed here), large companies will need to publicly report on their payment practices. If implemented the law would come into force from April 2016.
Says Richard Lindsay, IPA Director of Legal & Public Affairs: “We welcome this initiative by the government and very much hope that it will come to fruition. Late payment is an increasing problem in our industry, particularly because of the number of suppliers contributing to a project, each of which suffers if payment at the top of the chain is late or if payment terms are unfair. Many businesses publicise their commitment to corporate social responsibility. Paying suppliers within a reasonable time and on time should be a fundamental part of that commitment. We would encourage all advertisers to adopt the voluntary Prompt Payment Code as a minimum measure.”
According to the Government, the intention of the law is to try and curb the number of large companies adopting late or otherwise unfair payment practices by implementing clause 3 (Companies: Duty to Publish Report on Payment Practices) of the Small Business, Enterprise and Employment Bill.
Explaining that “late payment remains a significant problem for the UK economy”, the aim of the proposals is “to allow organisations with good payment records to highlight and celebrate their payment performance, whilst raising public awareness and scrutiny of poorer payers”.
The government’s view is that 30 day terms should be the norm and 60 days the maximum. All payments beyond 60 days represent “bad practice”, hence the 60 day maximum payment term in the voluntary Prompt Payment Code.
Should the plans be implemented, large companies will be required to report their payment practices and policies on a half-yearly basis. The reporting duty is intended to apply to large organisations – large private companies, large LLPs and all quoted companies - which would report in an open data format to a single, central, digital location.
The reporting requirements will include:
- standard payment terms, including any changes to these in the last reporting period.
- average time taken to pay.
- proportion of invoices paid beyond agreed terms.
- proportion of invoices paid in 30 days or less; paid between 31-60 days; and paid beyond 60 days.
- amount of late payment interest owed and paid.
- whether financial incentives were required to join or remain on supplier lists.
- dispute resolution processes.
- the availability of e-invoicing; supply chain finance; preferred supplier lists.
- membership of a Payment Code.
Last updated 07/04/2015