The Reporting on Payment Practices and Performance Regulations 2017 ('the Regulations') came into force on 6 April 2017. 'Qualifying' companies and their directors now face criminal prosecution and unlimited fines if they fail to report on their payment practices.
The Regulations apply to UK companies and LLPs where any two or more of the following thresholds apply:
- A turnover of >£36m
- A balance sheet of >£18m
- An average number of employees of 250
Twice yearly, qualifying companies must now submit a report with details including its standard payment terms for contracts for goods, services or intangible assets (but not financial services contracts), statistics showing the average time it takes the company to pay invoices and its payment process. The report must be approved by a director.
Failing to comply with the Regulations is an offence, as is publishing, or causing to be published, a statement that is misleading or false in the report.
The government hopes that by publishing payment practices, large companies will make timely payments to their suppliers and thereby reduce the cashflow difficulties which smaller businesses can face.
Companies should assess whether they 'qualify' under the Regulations and, if they do, put in place reporting procedures to ensure compliance going forward.