The Department for Business, Energy & Industrial Strategy (“BEIS”) has launched a Consultation aimed at giving the Small Business Commissioner (“SBC”) more power to help ensure small businesses are paid on time. The Consultation will close on 24 December 2020, with any accepted proposals being implemented via primary legislation.
The Consultation proposes to expand the SBC’s powers of investigation and enforcement, including:
- The power to order companies to pay the sums due when a complaint against them for late payment has been investigated and upheld
- The power to oblige companies to share information during an investigation by the SBC
- The power to launch investigations into companies which are suspected of bad payment practice, instead of requiring for an initial complaint from a small business
- Expanding the scope for complaints, allowing the SBC to investigate complaints about other payment matters in connection with the supply of goods and services
- The power to review and report on wider business practices outside of payment matters at the instruction of the BEIS Secretary of State
- The power to claim investigation costs from the investigated company where there are adverse findings against them
The new proposals are one in a number of steps taken by the Government to crackdown on late payments, notably including the introduction of the Reporting on Payment Practices and Performance Regulations 2017, which impose a duty on medium and large sized UK firms to report on their payment practices, policies and performance for financial years beginning on or after 6 April 2017 (see the September 2019 BEIS guidance here). We have already started to see the first big companies being “named and shamed” as a result of these reforms. The Consultation follows up on the Government’s response to the 2018 ‘Creating a Responsible Payment Culture’ Call for Evidence, in which it announced that it would bring forward a broad set of measures to set clear standards of good practice, increase responsibility at a Board level and allow SMEs to utilise payment technology .
In these difficult times the proposed new powers, if implemented, represent further welcome support for the start-up community and smaller firms. Small Business Minister Paul Scully said chasing late payments remained a “terrible” burden on SMEs. Despite the government’s previous efforts, according to the Consultation, £23.4 billion is presently owed to small business in late fees across the UK, causing crucial cashflow problems to SMEs and jeopardising their ability to trade. The deficit has been worsened during the COVID-19 pandemic, with larger businesses and LLPs delaying payments in efforts to save money.
Co-authored by James Highfield