Government reforms to tackle late payments

Reforms announced on Tuesday 24 May will include:

• Empowering the SBC to investigate and fine businesses suspected of poor payment practices or inaccurate payment reporting and enabling the SBC to settle payment disputes (reducing the need for costly litigation).
• Imposing a standard maximum payment term of 60 days, with limited exemptions, alongside a statutory time limit for disputing invoices. A 30-day limit on raising disputes was proposed in the consultation, but Government has yet to confirm whether this will be the introduced limit.
• Requiring businesses which are late in paying a significant proportion of invoices to lay out steps they will take to improve payment performance.
• Imposing a mandatory interest rate of the bank of England base rate + 8% on late payments, and mandating reporting of late payment interest.
• Implementing a ban on retention payments. This was put forward alongside a proposal for ring-fencing retentions, and CIAT recognised potential value in both approaches, while warning that new insurance models would be needed to offset any changes. Government has confirmed that it intends to pursue a full ban on retentions and will consult further on this proposal. Members and affiliates who wish to share their views on the proposed ban are invited to email [email protected]

All reforms will require changes in the law, meaning that none are yet in force. However, a summary of the policy changes can be found here.