April 26, 2017

UK Companies and LLPs: Duty to Report on Payment Practices and Performance



A duty for large companies and large limited liability partnerships (LLPs) to report on payment practices, polices, and performance under the Small Business, Enterprise and Employment Act 2015 came into force on 6 April 2017.

The reporting requirements are part of the UK government's drive to encourage transparency, aiming to increase transparency of the payment practices and performance of large UK businesses and to give small business suppliers better information to aid them decide with whom to trade, negotiate fairer terms, and challenge later payments.

This Advisory gives a snapshot of those reporting requirements for large companies and large LLPs. Businesses that may be subject to the new duty should review their payment practices and policies and ensure that they are prepared to report on these from 6 April 2017.

Who Must Report

The reporting requirements apply to "large companies" and "large LLPs", regardless of whether they are private, public, or quoted, that exceed certain size criteria and are both formed and registered under the Companies Act 2006 or previous companies legislation (in the case of a company), or registered under the Limited Liability Partnerships Act 2000 (in the case of an LLP).

To qualify as a large company or a large LLP, two or all three of the following thresholds must be exceeded on the balance sheet date of both its last two financial years:

  • annual turnover of £36 million or more;
  • balance sheet total of £18 million or more; and
  • more than 250 employees.

Each entity that meets those thresholds is required to publish its own individual report, rather than consolidated information relating to a larger group of which it may be part.

The duty will not apply to a company in its first financial year, or during any financial year beginning before 6 April 2017. The duty does not apply to entities incorporated outside of the UK, including overseas companies registered but not formed under the Companies Act 2006.

What Needs to be Reported?

Businesses that fall within the scope of the reporting requirements must prepare and publish information about their payment practices and performance in relation to qualifying contracts for each reporting period. A qualifying contract is a contract connected to the carrying on of a business for the purchase of goods, services, or intangible assets (including intellectual property). Business to consumer contracts, contracts for financial services, and contracts that do not have a significant connection with the UK do not fall within the scope of the reporting requirements.

The information reported must reflect the policies and practices that have applied during that period and the business's performance for that period. A relevant business will be required to publish the following information:

  • its standard payment terms, including any changes in payment terms from those of the last reporting period, and whether suppliers were consulted on any changes;
  • any process it follows for dispute resolution relating to overdue invoices;
  • details on late-payment interest and how much has been paid and is due to be paid by the business to suppliers;
  • whether the business offers e-invoicing, supply chain finance, or preferred supplier lists;
  • whether the business adheres to a payment code, and the name of the code;
  • whether the business has requested payment from suppliers to join or remain on supplier lists;
  • average time the business has taken to pay suppliers from the date of receipt of the invoice;
  • the percentage of invoices due within the reporting period that were not paid within the payment period; and
  • the percentage of invoices paid within the reporting period that were paid in 30 days or less, between 31 and 60 days, and over 60 days.

Frequency and Method of Reporting

In each financial year a qualifying entity has two reporting periods in respect of which it must publish a report: one for the first six months of its financial year (commencing on the first day of the financial year) and the second for the remaining period until its financial year's end. Businesses must publish a report for each reporting period within 30 days after the last day of each reporting period, and the first report must be published in respect of an entity's first financial year beginning on or after 6 April 2017.

The report must be published on a web-based service to be provided by the government. This web-based service will be available from the end of April 2017. The report must be approved by a company director, or a designated member in the case of an LLP, before it is published, and the company director or designated member who approved it must be named in the report.


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