Govt introduces new ways to tackle late payment

Monday 23 March 2015

The government is introducing new measures to tackle late payment by extending the Prompt Payment Code.

Despite not including details on the changes to the Prompt Payment Code in the Budget on March 18th, the government has since announced ways that it intends to extend the code. It plans to include the use of supplier lists, improving transparency of its own payment practices and making large companies legally obliged to publish information on their past performance concerning prompt payment. People who are signed up to the code will have a maximum payment term of 60 days.

The reason why the government intends to be more transparent about its own payment practices is that a report from the National Audit Office recently found that a third of small businesses were not receiving payments on time.

Late payment is an issue that has been problematic for contractors, limited companies and sole traders. Research from the Federation of Small Businesses (FSB) previously found that one in five small firms have been subjected to poor payment practices, with late payment being in the top five.

What's more, in its most recent incarnation, the FSB found that the majority of its members do not think the Prompt Payment Code goes far enough. Only 21 per cent of the FSB's members said that they were confident the code would be enough to make a difference to poor payment culture in the UK.

Commenting on the new measures included in the code, national chairman of the FSB John Allan said that this sends a clear messages that such poor payment practices as late payment will not be tolerated anymore.

He also said that the new measures to strengthen the code were welcome but added that the code needs to be rigorously monitored and enforced for it to work.

Changes to the code were also welcomed by the Association of Independent Professionals and the Self Employed (IPSE).

Chief executive of IPSE Chris Bryce said: "Late payment remains a major issue for small businesses across the country who rely on regular pay to keep their business afloat. It’s encouraging that the Government has recognised that this issue impacts heavily on people’s livelihoods and are trying to tackle the problem.

“The new measures announced today will mean the worst offenders will be named and shamed, something which we called for in our manifesto."

Mr Bryce added that the announcement did fall short slightly as it did not say that a small business conciliation service would be created. This is something that IPSE has been campaigning for as a means of allowing independent professionals to obtain the payments they are due without entering into a lengthy court battle.

However, Mr Bryce also noted that the Conservative party has promised to deliver this policy. He added that he hopes that all parties will commit to creating a small business conciliation service.

The same research from the FSB that discovered a lack of faith in the code also found that 60 per cent of the FSB's members would like to see a full, independent inquiry into the poor payment practices of businesses.

By Victoria McDonnell

Get in touch

Please select your type of enquiry:

Brookson on Twitter