On 6 April 2017 new rules will come into force that will require LLPs and medium and large companies to publish reports on their payment practices.
The Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017 and The Reporting on Payment Practices and Performance Regulation 2017 will require these businesses to report the information online every six months.
While the new rules come into effect this April, they will apply to financial years beginning on or after that date, meaning that many businesses will need to ensure their systems are changed so they can recover and report the required payment information.
The Department for Business, Energy and Industrial Strategy (BEIS) has issued guidance, entitled Business payment practices and performance: reporting requirements, which lays out how and when businesses should report their practices.
According to this document the earliest reports will appear for businesses with periods beginning from 6 April and the first significant volume will be from those with a 30 June year end.
In particular, the new reporting requirements will be placed on 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, which exceed two or more of the following on their last two balance sheet dates:
- £36 million annual turnover
- £18 million balance sheet total
- 250 employees.
Any business incorporated outside the UK, including companies registered under the Companies Act but not formed under the Companies Act, are not required to report.
Under the rules, businesses will only be required to report on qualifying contracts. In order to qualify, a contract must fall under all of the following criteria:
- It is between two (or more) businesses
- It has a significant connection with the United Kingdom
- It is for goods, services or intangible property, including intellectual property
- It is not for financial services.
Once a qualified contract is identified the business must report:
- the business’s standard payment terms, which must include
- the standard contractual length of time for payment of invoices
- maximum contractual payment period
- any changes to the standard payment terms in the reporting period
- how suppliers have been notified or consulted on these changes
- the business’s process for resolving disputes related to payment.
- the average number of days taken to make payments in the reporting period
- the percentage of payments made within the reporting period which were paid
- in 30 days or fewer
- between 31 and 60 days
- 61 days or longer
- the percentage of payments due within the reporting period which were not paid within agreed terms.
They must also report whether:
- suppliers are offered e-invoicing
- supply chain finance is available to suppliers
- 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
- the business is a member of a payment code, and the name of the code.
Failure to meet the reporting requirements is a criminal offence and every director of the company or designated member of an LLP could be found liable.
Milsted Langdon’s Business Innovation Team, has developed a service to help businesses comply with the new onerous reporting obligations by extracting relevant data from accounting systems and auditing it to give companies assurance as to its accuracy and reliability. If you would like to know how we can help you with these new reporting requirements, please contact us.