Summary: For financial years beginning on or after 6 April 2017, large UK companies and LLPs will need to report, on a half-yearly basis, on their payment practices, policies and performance.

Businesses with financial years beginning 1 January will be required to file their first report in July 2018. To assist companies in complying with these provisions, the Government has published guidance.

Which businesses need to report?

The provisions apply to:

  • companies that have been formed and registered under the Companies Act 2006 (CA2006) or previous legislation, eg. an international group with a subsidiary incorporated in the UK will only need to report for the UK subsidiary; and
  • LLPs registered under the Limited Liability Partnerships Act 2000,

subject to meeting the size criteria.

What are large companies/LLPs?

Businesses will be caught if, on their last two balance sheet dates, they exceeded two or all of the thresholds for qualifying as a medium-sized company under the CA2006, ie. £36m annual turnover, £18m balance sheet total and 250 employees (or two of these).

A parent company or LLP that has one or more subsidiaries must report if both the parent itself and the group it heads are large. Using current thresholds, a parent which exceeded £43.2m turnover, £21.6m balance sheet total and 250 employees (or two of these) will be required to report. See the flowchart below for further information.

Newly incorporated companies will not be required to report in their first financial year and will only need to report in their second financial year if, in their first financial year, they exceeded at least two of the thresholds.

What needs to be reported?

Businesses in scope must prepare and publish information about their payment practices and performance in relation to qualifying contracts. Qualifying contracts are those which:

  • are between two (or more) businesses;
  • have a significant connection with the UK, eg. a contract performed in the UK or where one or both parties is established in the UK or carries on a relevant part of their business in the UK;
  • are for goods, services or intangible property, including intellectual property; and
  • are not for financial services.

The information that needs to be published includes:

  • narrative descriptions of the business’ standard payment terms, how suppliers have been notified or consulted on changes and the business process for resolving pay disputes;
  • statistics on the average number of days taken to make payments in the reporting period and the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days and in 61 days or longer; and
  • statements about whether suppliers are offered e-invoicing and whether supply chain finance is available.

Where should the information be reported?

The Government is to provide a web service for this from April 2017 and the report must be published within 30 days of the end of the reporting period. The business and every director each commit a criminal offence if they fail to publish a report within the specified filing period.