New rules requiring medium and large companies and LLPs to publish reports on their payment practices come into force on 6 April.
Many of these businesses will need to ensure their systems are changed so they can recover the required information.
The Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 and The Reporting on Payment Practices and Performance Regulation 2017 come into effect on 6 April and apply for financial years beginning on or after that date. Businesses are required to report the information every six months on a website that will be on gov.uk. BEIS have said that this will be available from April 2017.
The guidance issued by BEIS Business payment practices and performance: reporting requirements highlights the following reporting timeframes. The earliest reports will appear for businesses with periods beginning from 6 April. The first significant volume will be from those with a 30 June year end:
First year reports
|Financial year beginning||What is the first reporting period?||When must the first report be published on the web service?|
|1 January||1 January 2018 to 30 June 2018||On or before 30 July 2018|
|1 April||1 April 2018 to 30 September 2018||On or before 30 October 2018|
|5 April||5 April 2018 to 4 October 2018||On or before 3 November 2018|
|6 April||6 April to 5 October 2017||On or before 4 November 2017|
|After 6 April||First six months of the business’s 2017-18 financial year||Within 30 days starting on the day after the end of the business’s first reporting period.|
The new reporting requirements are placed on a business that exceeds two or more of the following on their last two balance sheet dates:
- £36m annual turnover
- £18m balance sheet total
- 250 employees.
Group limits also apply as do rules for new companies. These are required, if within scope (a single year balance sheet date rule applies), to report in their second financial year.
The reporting requirement applies to companies that have been formed and registered under the Companies Act 2006 (or previous legislation) and LLPs registered under the Limited Liability Partnerships Act 2000. Businesses incorporated outside the UK, including overseas companies registered under the Companies Act but not formed under the Companies Act, are not required to report.
The reporting business will need to report on qualifying contracts. A qualifying contract is one which satisfies all of the following:
i. It is between two (or more) businesses
ii. It has a significant connection with the United Kingdom
iii. It is for goods, services or intangible property, including intellectual property
iv. It is not for financial services.
For each reporting period businesses are then required to report on the following, in relation to qualifying contracts:
Narrative descriptions of:
i. the business’s standard payment terms, which must include – the standard contractual length of time for payment of invoices, maximum contractual payment period and any changes to the standard payment terms in the reporting period, and how suppliers have been notified or consulted on these changes
ii. the business’s process for resolving disputes related to payment.
i. the average number of days taken to make payments in the reporting period, from the date of receipt of invoice or other notice
ii. 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
iii. the percentage of payments due within the reporting period which were not paid within agreed terms.
Statements (ie a tick box) about:
i. whether suppliers are offered e-invoicing
ii. whether supply chain finance is available to suppliers
iii. whether the business’s practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list, and whether they have done this in the reporting period
iv. whether the business is a member of a payment code, and the name of the code.
The sanction for non-reporting is that failure to meet the reporting requirement is a criminal offence by the business, and by every director of the company or designated member of an LLP.
Article from ACCA In Practice