The government has published the Reporting on Payment Practices and Performance Regulations 2017. The regulations come into force on 6 April 2017 and, subject to certain exceptions, the duty to report will apply in relation to financial years beginning on or after 6 April 2017.
The regulations only apply to "qualifying" companies incorporated within the UK. Whether a company is a qualifying company depends on whether it is a parent company or not.
As regards a non-parent company, if it exceeds any two (or all three) of the thresholds set out below, it will be a qualifying company. As regards a parent company, it faces a two stage test before it is considered a qualifying company:
- first, the parent company must, as an individual company, exceed any two (or all three) of the thresholds below; and
- secondly, the group of which the parent company is the head must exceed any two (or all three) of the specified thresholds.
The balance sheet thresholds are:
- Annual turnover: £36 million net (£43.2 million gross).
- Balance sheet total: £18 million (£21.6 million gross).
- Average number of employees: 250.
The Regulations require qualifying companies to report on relevant contracts, broadly:
- contracts for goods, services, or intangible assets (including intellectual property) entered into in connection with the carrying on of a business;
- are not a contract for financial services; and
- have a significant connection with the UK, such as contracts to be performed in the UK or where one or both of the parties is either established in the UK or carries on a relevant part of their business in the UK.
The report must be published on a web-based service to be provided by the government (available from April 2017) and suppliers, and other interested parties, will be able to view the information as soon as it has been published.
Qualifying companies will need to report on their standard payment terms, including:
- the period in which the company is contractually required to pay a sum, expressed in days;
- details of any variations to the standard payment terms made by the company in the reporting period;
- details of any notification or consultation by the company with suppliers prior to the variation;
- a description of the maximum payment period specified in a qualifying contract;
- an explanation of the company's process for resolving a payment-related dispute with a supplier;
- various details about the company's payment practices and policies;
- a statement of the average number of days taken to pay suppliers; and
- a statement as to whether the company has deducted a charge levied on a supplier for remaining on the company's list of suppliers or potential suppliers.
Breach of the reporting requirements is a criminal offence.
For further information on this topic please contact Hannah Kendrick at Squire Patton Boggs by telephone (+44 161 830 5000) or email ([email protected]). The Squire Patton Boggs website can be accessed at www.squirepattonboggs.com.
This update has been reproduced in its original format from Lexology – www.lexology.com.