According to recent research by the Federation of Small Businesses, late payment costs the UK economy £2.5 billion each year – and ending late payments would have saved 50,000 UK businesses from failing in 2014.

Businesses of all sizes will therefore be interested to know about a new payment complaints scheme that is in the offing. The government is currently consulting on some of the detail.

Overview

The scheme will apply to complaints from a small business where it has payment issues in connection with the supply of goods or services to a larger business.

A Small Business Commissioner will consider the complaints and make findings. S/he might also direct the small business to other services that could help resolve the matter.

The government hopes to encourage a culture change in how businesses deal with each other – and that this will result in fewer disputes between larger and smaller businesses.

A bit more background

The payment issues to be covered by the scheme are quite broad in scope. Obviously it will include a failure by a larger business to pay the small business. But a small business will also be able to complain if, for example, the larger business requests a new fee, or if it tries to change the price or fees already agreed.

The Commissioner is to decide complaints by reference to what s/he considers to be fair and reasonable in the circumstances.

The Commissioner’s findings won’t be legally binding. So neither party will have to follow any recommendations that s/he makes. Rather, the government believes that the Commissioner’s determination and any recommendations should enable the parties to resolve the issue.

The Commissioner will have the discretion to publish a report on the complaint. If a report is published, the Commissioner may also choose to include the name of the business which was complained about. So larger businesses will have potential reputational risks to consider.

What’s the consultation about?

The consultation concerns some of the aspects of how the scheme should operate. Matters up for consultation include:

  • How to calculate a small business’ headcount to determine whether it can bring the complaint – the scheme is only available to businesses whose headcount is under 50.
  • The parameters for bringing a complaint e.g. time limits.
  • What factors the Commissioner should take into account in determining whether an act or omission is “fair and reasonable”.
  • What factors the Commissioner should take into account when deciding whether to name the business complained about if s/he is publishing a report.

Next steps

Businesses of all sizes could be affected by the new scheme, either because they will be able to make complaints or because they could be on the receiving end of a complaint.

Business owners may wish to consider reading the consultation if only to familiarise themselves with the proposals for the scheme.

Responses to the consultation need to be submitted by 7 December 2016. A timetable for the scheme’s introduction has not yet been published.