New UK legislation: The Reporting on Payment Practices and Performance Regulations 2017 On 31 January 2017 the Department for Business, Energy & Industrial Strategy (BEIS) announced the new Reporting on Payment Practices and Performance Regulations 2017 requiring large UK companies to publicly report how quickly they pay their suppliers. The new legislation comes into effect on 6th April 2017. BEIS has published a Guidance note to explain the scope of the regulations. Click here. Which businesses will need to comply? • Large UK companies formed and registered under the Companies Act 2006 (or previous legislation) and LLPs registered under the limited liability Partnerships Act 2000. • A business will qualify as a large UK company if it exceeds any two of the following thresholds: o more than £36 million annual turnover; o more than £18 million balance sheet total; or o more than 250 employees. • Reporting must be made if a company has exceeded the size thresholds for their last two balance sheet dates. No company is required to report in its first financial year. • Reporting must be made per individual company, not at a group level. Frequency of reporting and where will the report be published? The reporting requirement will apply to businesses whose financial year starts on or after 6 April 2017. Reporting will be required every 6 months. The first report is due 30 days after the end of the first six months of a business's financial year. The second report is due 30 days after the end of the business's financial year. • As an example, a company has its next financial year beginning 1 January 2018: o the first 6 month reporting period will be 1 Jan 2018 - 30th June 2018. The report must be published within 30 days, on or before 30 July 2018. o the second 6 month reporting period will be 30 July 2018 - 31 December 2018. The report must be published within 30 days, on or before 30 January 2019. The report will be published on a website provided by the government. What will the report need to disclose? Companies will be required to publish information on: • standard terms relating to payment, or the most frequently used payment terms where there is no standard. Businesses can choose to include a link to any standard terms published on their website. • standard payment period in days or if there is no standard, the most commonly used payment term and also the maximum payment period that a business has agreed. • any changes to the standard payment terms in the reporting period and if such a change was made, whether suppliers were consulted or notified before the change was made. • the process for resolving disputes about payment; • statistics on the percentage of invoices paid in less than 30 days, paid between 31 and 60 days, and over 61 days; • the percentage of invoices which were not paid within the agreed payment period. this includes invoices or payments which are under dispute; • any sums deducted from invoices to remain on a supplier list; • availability of e-invoicing and supply chain finance; and • membership of a payment code e.g. the Prompt Payment Code. Which contracts are included? Businesses will need to report on contracts which meet all the following requirements: • it is between two or more businesses; • it has a significant connection with the UK, for example the contract is performed in the UK or one or both parties is established in the UK. • the contract is for the purchase of goods, services or intangible property (including IP); and • it is not for financial services. Note that financial services businesses contracting for other goods or services still need to report on their payment practices for those contracts. Director approval and liability A director will be required to approve the information before it is published on the website. Failure to report within the 30 day filing period, or publishing a false or misleading report is a criminal offence with the directors and company liable to a fine. For more information, please contact Duncan Reid-Thomas, Doris Myles or Louise Webb.