As part of the King’s Speech on 13 May, the Small Business Protections (Late Payments) Bill was confirmed.
Here’s what’s in it for you as a small business owner.
What’s included in the Small Business Protections (Late Payments) Bill?
A 60-day cap on payment terms for large companies paying smaller companies
Interest set at 8% above Bank of England base rate for late payments
A time restriction for raising invoice disputes
A ban on deducting and withholding retention payments under construction contracts
A new requirement for boards or audit committees of large companies that have a history of persistent late payments to report on their poor payment performance and how they’ll fix it
Give the Small Business Commissioner powers to fine businesses that persistently pay late
Give the Small Business Commissioner powers to investigate business suspected of poor payments practices and adjudicate disputes between businesses
What happens next?
The Bill will need to go through a series of parliamentary stages, from the first and second reading right through to Royal Assent when the Bill becomes an Act.
We’ll keep you updated with what’s going on throughout this process.
Expert reaction
The reaction to the news is broadly positive, but some feel that there are gaps to be addressed.
Glenn Collins, head of technical and strategic engagement at ACCA, said:
“ACCA welcomes the commitment to tackle poor payment practices, but the real test will be whether reforms improve cashflow in practice and give smaller businesses the certainty they need to plan and grow. Given the impact that late payments have on small businesses, we would urge the government to seek to bring in the reforms at the earliest possible opportunity.
“We are fully supportive of increasing powers for the Small Business Commissioner (SBC) – balanced with adequate resourcing – to ensure persistent late payers bear the costs of any investigative work of the SBC.”
Lisa Cleaver, SME funding expert and COO of eCapital, said:
“Fines for late payments are a step in the right direction, but the issue will persist because, for an SME, challenging a big customer risks a relationship that takes years to build. Small businesses should not have to choose between getting paid and keeping a client. An act passed in 1998 gave small businesses the right to charge interest on late invoices, but most don’t.”
Joe Phelan, business banking expert at money.co.uk, said:
“Any legislation that improves payment protections for small businesses could have a direct and positive impact on the freelance community. The priority now is ensuring these commitments translate into practical reforms that genuinely improve day-to-day working conditions for independent professionals.”
Read more
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