In this issue, we examine the Government's final proposals for requiring large companies to publish their invoice payment practices.


The Department for Business, Energy and Industrial Strategy ("BEIS") has published a response to its consultation on requiring large businesses to disclose details of their invoice payment practices.


In November 2014, the Department for Business, Innovation and Skills ("BIS") (as it then was) published a consultation on introducing new regulations to require certain businesses to publicly disclose information on their practice of paying invoices.

On 2 December 2016, BEIS published its response to the consultation, along with final draft regulations. They can be found here.

BEIS intends to push ahead with implementing the regime from 6 April 2017. Much of the detail from the consultation remains similar, but there are some changes.

What does the regime require?

Entities that are subject to the regime will be required to compile reports on their invoice payment practices every six months and make those reports available to the public.

The idea is to give customers and suppliers more information when dealing with large businesses. If suppliers can see how long a particular organisation takes to pay its invoices, they can make a more informed decision whether to do business with that organisation.

Which businesses are caught?

The regime will apply to UK companies and limited liability partnerships ("LLP"s). It will not apply to overseas entities or to other UK legal entities (such as building societies).

An entity will be within the regime if it was large on its last two consecutive balance sheet dates. (If the entity is in its second financial year, it will be within the regime if it was large on its last balance sheet date. The regime will not apply to entities that have not yet completed a full financial year.)

This differs from the initial proposal to apply the regime to all quoted UK companies regardless of size.

An entity is "large" if it meets at least two out of following three thresholds on the date(s) in question:

  • annual turnover of 36m or more
  • balance sheet total of 18m or more
  • 250 or more employees.

Reporting will be on an entity-by-entity basis. Groups will not be able to consolidate their reports as they do financial statements. However, an entity that heads up a group will not need to report unless the group it heads up also meets the group conditions for being "large". This appears to be designed to allow parent companies to take intra-group transactions into account when calculating its thresholds.

We have produced a flow diagram at the end of this update to help work out when an entity is covered.

Which contracts are covered?

Entities will only be required to report on business-tobusiness contracts involving goods, services or intangible goods. (This includes contracts relating to intellectual property.)

This means consumer contracts will not be covered, although this is not surprising, given that consumers do not invoice businesses. Contracts for financial services are also excluded, but financial services businesses will still need to report on other kinds of contract that are covered.

Broadly speaking, entities will only report on contracts with a significant connection with the UK. The draft regulations do not define this phrase, so businesses will need to form a view on each individual contract. For those with many cross-jurisdictional contracts, this may require much time and effort.

How will reporting work?

Businesses will report every six months. They will have 30 days from their half-year end and their full financial year end to deliver the report. This is a true six-monthly report. If an entity extends its financial year to more than 15 months, it will have to deliver three reports.

Entities will have to publish their reports on a web-based service provided by the Government. They will be free to publish them on their own websites as well, if they wish.

It will be a criminal offence to fail to comply with the regime, or to report false information.

The Government intends to produce guidance to help businesses with complying with the reporting requirements. This guidance has not yet been published. However, the intention is to lay it before Parliament alongside the draft regulations, so we should expect something early next year.

What will the report contain?

The six-monthly report will need to state the following information for each reporting period:

  • A description of the entity's standard payment terms, including the period for payment, any changes since the last reporting period, and the maximum payment period entered into.
  • The average number of days taken to pay an invoice from the date on which it is received.
  • The percentage of payments made within 30 days of receipt, between 31 and 60 days after receipt, and more than 60 days after receipt. This is measured by number of invoices paid, not value. Entities will not be able to pay larger invoices first to present more favourable statistics.
  • The percentage of invoices not paid by their due date.
  • An explanation of the entity's procedure for resolving invoice disputes.
  • Whether the entity is signed up to a voluntary payment code (and, if so, which).
  • Whether the entity offers e-invoicing and supply chain finance.
  • Whether the entity has a "pay to stay" list and has charged any suppliers to stay on that list.
  • Significantly, BEIS has dropped the requirements to state the percentage of payments made more than 60 days after receipt of an invoice and the amount of interest owed and paid.
  • However, BEIS has not adopted suggestions that the figures exclude disputed invoices. It is worried this may encourage "stalling tactics" which might presumably distort the figures in the report.

Practical implications

This is a new level of detail in financial reporting which many organisations will not be familiar with. Some organisations will not be geared up to providing this level of granularity and may find they need to undertake significant work to be in a position to prepare the required reports.

Fortunately, the regime applies to financial years beginning on or after 6 April 2017. So businesses still have a few months to put any necessary systems in place.

However, from that date, they will need to monitor invoice payments carefully and in real time to capture the data that needs to be published.

Click here to view chart.