Guidance

Duty to report: guidance to reporting on payment practices and performance

Updated 30 October 2024

Introduction

Every year, thousands of businesses experience severe administrative and financial burdens simply because they are not paid on time. Late payment is a key issue for business, especially smaller businesses, as it can adversely affect their cash flow and jeopardise their ability to trade. In the worst cases, late payment can lead to insolvency.

Regulations made under section 3 of the Small Business, Enterprise and Employment Act 2015 (and, for limited liability partnerships (LLPs), section 15 of the Limited Liability Partnerships Act 2000), introduce a duty on the UK’s largest companies and LLPs to broadly report on a half-yearly basis on their payment practices, policies and performance for financial years beginning on or after 6 April 2017.

The information must be published through an online service provided by the government and will be available to the public.

This guidance is for companies and LLPs who must comply with the statutory reporting duty for payment practices and performance. As shorthand, companies and LLPs are referred to as businesses throughout this document.

Businesses or groups not subject to the duty may follow this guidance if they would like to submit a report voluntarily.

The legislation governing the reporting requirements for companies is the Reporting on Payment Practices and Performance Regulations 2017 and for LLPs, the Limited Liability Partnerships (Reporting on Payment Practices and Performance) Regulations 2017, both of which can be found on legislation.gov.uk.

Changes from January 2025

Under the Reporting on Payment Practices and Performance (Amendment) Regulations 2024, new reporting requirements have been introduced for companies in scope of the reporting requirement. These new requirements will apply in relation to each financial year of a company beginning on or after 1 January 2025.

These new requirements relate to:

• the sum total of payments made during the reporting period
• the percentage of payments that were paid during the reporting period which were not paid within agreed terms because of a dispute

Legal disclaimer

This document has been prepared to provide general guidance only. The interpretation of the law on the duty to publish information on payment practices and performance is ultimately a matter for the courts. Users of this guidance should seek their own legal advice where appropriate.

Contact us

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Who needs to report

The reporting requirement applies to companies and LLPs (regardless of whether they are private, public or quoted) which exceed certain size criteria, as outlined below. The companies and LLPs in scope of the requirement are referred to in the regulations as ‘qualifying companies’ and ‘qualifying LLPs’. Companies and LLPs are collectively referred to as businesses throughout this guidance.

In the context of the reporting requirement, ‘company’ means a company formed and registered under the Companies Act 2006 or previous legislation and ‘LLP’ means a limited liability partnership registered under the Limited Liability Partnerships Act 2000.

Entities which are not companies or LLPs under these definitions are not required to report; for example, the reporting requirement does not apply to unlimited liability partnerships, nor to companies which are incorporated under another country’s laws.

Companies formed and registered under the Companies Act 2006 or previous legislation will have a company number issued by the Registrar of Companies, as will LLPs registered under the Limited Liability Partnerships Act 2000.

The information for the reporting requirement should be prepared and reported on an individual company or individual LLP basis, not at a group level. The reporting requirement is not met if the information is provided on a group basis.

Size criteria for the reporting requirement

Businesses are in scope of the requirement for a financial year if, on their last 2 balance sheet dates, they exceeded 2 or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006 (section 465(3)). The thresholds relate to turnover, balance sheet total and average number of employees.

At the time of publication, these thresholds are:

• £36 million annual turnover
• £18 million balance sheet total
• 250 employees

Turnover is the amounts derived from the provision of goods and services after deduction of trade discounts, value added tax and other taxes based on the amounts so derived.

Balance sheet total meaning the total of the fixed and current assets

The number of employees means the average number of people employed by the company or LLP in the year, determined as follows:

• for each month in the financial year, find the number of people employed under contracts of service by the company or LLP (whether throughout the month or not)
• add together the monthly totals
• divide by the number of months in the financial year

These thresholds are periodically updated. When businesses are considering if they are in scope of the reporting requirement for a financial year then, if the Companies Act thresholds have been updated for that financial year, the updated thresholds should be applied retrospectively to the preceding 2 years for the purpose of the reporting requirement size tests.

No business is required to report in its first financial year in respect of years which began before 6 April 2017. A business will be in scope of the duty in its second financial year, if in its first financial year it exceeded 2 or all of the thresholds for qualifying as a medium-sized company. Businesses in their second financial year should refer to their first financial year figures only.

A parent company or LLP that has one or more subsidiaries must report if both the parent itself and the group it heads fit the criteria detailed in the Parent companies and parent LLPs section. The thresholds that apply to individual companies/LLPs are different if they are also parent companies.

Businesses operating outside of the UK

The reporting requirement applies to qualifying 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.

Businesses incorporated outside of the UK, including overseas companies registered under the Companies Act but not formed under the Companies Act, are not required to report.

Example:

An international company incorporated in a non-UK country has subsidiaries incorporated in several countries, including one incorporated in the UK. The UK subsidiary is in its fifth year of trading and for its last 2 financial years it had a £40 million turnover and 300 employees.

The international company is not required to report, but its UK subsidiary company will need to, because it was formed and registered under the Companies Act and has exceeded the size requirements.

There is separate guidance about the contracts for which businesses must report their payment practices and performance. This will affect reporting for businesses that operate or deal with businesses outside of the UK.

Mergers and takeovers

If a new company or LLP with a new registration is created as a result of a merger or takeover, then the new company or LLP will be excluded from reporting in its first financial year. Following this, if the company or LLP exceeds the size test, it must report.

If a business is involved in a merger, takeover or acquisition but continues with the same company registration number, then it will be required to report if it exceeds the thresholds for qualifying as a medium-sized company (or if applicable, the thresholds for parent companies and parent LLPs).

Parent companies and parent LLPs

Any company or LLP which has one or more subsidiaries is a parent company or parent LLP. A parent company or LLP will have to report in financial years for which both the parent itself and the group that it heads have exceeded relevant size criteria.

A parent company will exceed the current group threshold, and therefore be required to report, if it meets at least 2 of the following in the preceding 2 years:

• turnover of more than £43.2 million
• balance sheet total of more that £21.6 million
• over 250 employees

Parent companies or parent LLPs that exceed the thresholds for qualifying as a medium-sized company by a small margin should pay close attention to the following paragraphs.

There are 2 stages. The first stage for a parent company or LLP is to consider whether its figures for the last 2 financial years (as an individual company or LLP) bring it in scope of the reporting requirement.

If the first test is not met, the parent company or parent LLP will not need to report on its own payment practices and performance.

If the first test is met, the next stage is to consider whether the company exceeds 2 or all of the thresholds listed in section 466(4) of the Companies Act 2006, as set out below. If so, the parent company or parent LLP will need to report on its own payment practices and performance.

The aggregate group figures are calculated by adding the figures for each member of the group.

At the time of publication, the thresholds for groups are:

• aggregate turnover: £36 million net (or £43.2 million gross)
• aggregate balance sheet total: £18 million net (or £21.6 million gross)
• aggregate number of employees: 250

‘Net’ here means after any setoffs and other adjustments to exclude group transactions. These set-offs and adjustments are to be made in accordance with the Companies Act 2006 and the accounting rules which apply to the group.

‘Gross’ means without those setoffs and adjustments.

These thresholds are periodically updated. When businesses are considering if they are in scope of the reporting requirement for a financial year then, if the Companies Act thresholds have been updated for that financial year, the updated thresholds should be applied retrospectively to preceding years for the purpose of the reporting requirement size tests.

Any qualifying company or LLP within a group will need to report individually on its own payment practices and performance.

Those companies or LLPs within the group that do not exceed the thresholds for qualifying as a medium-sized company will not need to report.

Joint ventures

If a joint venture vehicle is incorporated as a company or LLP, it may need to report on its payment practices and performance, depending on whether it exceeds the size test, as above.

What needs to be reported

The reporting requirement

Reporting obligations

Businesses in scope of the reporting requirement must prepare and publish information about their payment practices and performance in relation to qualifying contracts, for each reporting period in the financial year. The information for each reporting period must reflect the policies and practices which have applied during that period, and the business’s performance for that period.

The report must be published on the web-based service provided by the government within 30 days of the end of the reporting period.

The report must contain the information required by the regulations and must be approved by a named company director or a designated member.

What happens if a business does not comply

Anyone who is concerned that a business might not have complied, or may have made a false statements, can raise this by contacting the business director or by contacting the Department for Business and Trade (DBT) [email protected].

If a concern is raised with the department, or if the department thinks the business is in-scope and should be complying, the business will usually be contacted to remind them to comply and to seek an explanation for non-compliance or discrepancies.

The business could be prosecuted if they do not comply, or if they provide false information.

Sanctions if a business does not comply

It is a criminal offence by the business, and every director of the company or designated member of an LLP, if the business fails to publish a report containing the necessary information within the specified filing period of 30 days.

Anyone who publishes a report or makes a related statement which is misleading, false or deceptive commits a criminal offence if they knew, or were reckless, about it being false or misleading at the time it was made. This applies to businesses and individuals.

It is a defence for a director to prove that they took all reasonable steps to ensure that the company submitted a report before the end of the filing period.

These offences are punishable on summary conviction by a fine.

Which contracts should be reported on

A contract may be defined as an agreement between 2 or more parties that is intended to be legally binding. When a business buys goods or services from another business, both parties generally enter into a contract. A contract could be written, verbal or both.

Businesses in scope of the duty to report are required to publish information about their payment practices and performance in relation to qualifying contracts. They should not include information about any other contracts in their reports.

Qualifying contracts

A qualifying contract is a contract which satisfies all of the following:

• it is between 2 (or more) businesses - this is not limited to companies and could include sole traders, LLPs, companies, multinational businesses and public sector bodies
• it is sufficiently linked to the United Kingdom
• it is for goods, services or intangible property, including intellectual property
• it is not for financial services

In practice, this means that financial services businesses will only report on contracts not relating to financial services (for example, contracts for other services and goods such as office supplies).

Businesses contracting to receive financial services will also not report on those contracts but must include contracts for other services in their reporting.

Receipt of invoice

Receipt of invoice is when the business receives the invoice, whether by email, post or other means. This is not the date on which the invoice is entered on to the business’s software system, unless this process happens on the same day as the invoice is received.

Example 1:

Company A has a payment policy that its Accounts Payable department will pay all approved supplier invoices within 30 days of receiving them. However, Company A receives an invoice from a supplier via email on 1 January (day 1).

Before this invoice can be passed onto Company A’s Accounts Payable department to be paid, the invoice must go through Company A’s internal 20-point approval process.

The invoice finally completed this approval process on 29 June (day 180). The invoice was then sent to Company A’s Accounts Payable department to be paid and was paid in full on 29 July (day 210).

In this example, time taken to pay this invoice should be calculated as 210 days and Company A should report the payment of invoices like this, as 210 days.

Example 2:

Company B uses a third-party company and/or internal subsidiary to process the payment of supplier invoices. Company B has an agreed sign off process to sign off invoices for payment within 30 days of receipt and make the required payment to the third-party company and/or internal subsidiary.

The third-party company and/or internal subsidiary then makes the payment to the supplier. In practice Company B receives an invoice from a supplier on 1 March (day 1).

Company B signs off this invoice to be paid and makes payment to the third-party company and/or internal subsidiary on 30 March (day 30). The third-party company and/or internal subsidiary pays the supplier in full on 28 June (day 90).

In this example, time taken to pay this invoice should be calculated as 90 days and Company B should report the payment of invoices like this, as 90 days.

Example 3:

Company C has a payment policy that an invoice is counted as ‘received’ once a third-party client signs off the completed works/service as satisfactory, even if Company C had physically received the invoice several days before the third-party signs it off.

Once signed off by the third-party, Company C’s policy is pay invoices in 60 days. In practice Company C receives an invoice on 1 April (day 1). Their third-party client signs of the completed works/service as satisfactory on 15 April (day 15).

Company C pays the invoice in full on 14 June (day 75).

In this example, time taken to pay this invoice should be calculated as 75 days and Company C should report the payment of invoices like this, as 75 days.

Sufficient link to the United Kingdom

A sufficient link between a relevant contract and the United Kingdom is demonstrated where one or more of the following apply:

• the parties have not chosen a law to apply to the contract (for example, through a choice of law clause) and through applicable legal rules the contract is governed by the law of part of the United Kingdom (for example, the law of England and Wales, Scotland or Northern Ireland)
• the parties have chosen for the law of part of the United Kingdom to apply to the contract and:
  • i) without that choice, the law applying to that contract would have been the law of part of the United Kingdom; or
  • ii) the contract has a significant connection to the United Kingdom (for instance, the contract is performed in the UK, the place of delivery is the UK, payments are made under it in the UK, one or more of the parties are established or carry out their business in the UK)
• the parties have chosen for the law of a place outside of the United Kingdom to apply to the contract and:
  • i) without that choice, the law applying to that contract would have been the law of part of the United Kingdom; or
  • ii) the contract has no significant connection with any country outside of the United Kingdom

The following examples show situations which are likely to indicate a sufficient link to the UK, although the particular circumstances of each reporting business’s contracts will need to be considered.

Example 1:

A reporting business has a contract with a supplier incorporated in a non-UK country, but who has an office in the UK and the supplier makes the arrangements for the contract through this office. The goods agreed under the contract are delivered in the UK.

For the purposes of the reporting requirement, this would indicate a significant connection to the UK. The contract states that it is governed by the law of England and Wales. It must be included in the business’s reporting information.

Example 2:

A reporting business has a contract with a non-UK supplier. The supplier has no UK establishment and the parties agreed in the contract that it is governed by a non-UK law, but the person providing the service under the contract is based in the UK and works in the reporting business’s office.

The contract has no significant connection to any other country, and the applicable law would have been UK law if the parties had not agreed otherwise.

For the purposes of the reporting requirement, this would be sufficiently linked to the UK and it must be reported on.

Example 3:

A reporting business with a number of overseas offices has a contract with a supplier incorporated outside of the UK who does not have any UK establishments, and the goods are delivered outside of the UK to the reporting business’s office there.

When the contract was agreed, it was written in English and made under Scottish law. If that choice had not been made, the contract would have been governed by a non-UK law (under legal rules). Apart from the contract being written in English and the reporting business being incorporated in the UK, there is nothing to link the transaction with the UK.

For the purposes of the reporting requirement, this contract would not have a sufficient link to the UK, and it should not be included in the reported information.

Summary of information required

For each reporting period, businesses are required to report on the following in relation to qualifying contracts.

Statistics on:

• the average number of days taken to make payments in the reporting period, measured from the date of receipt of invoice or other notice to the date the cash is received by the supplier
• the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer
• the sum total of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer
• the sum total of payments which were not made within agreed terms during the reporting period
• the percentage of payments due within the reporting period which were not paid within the agreed payment period
• the percentage of invoices that were not paid within agreed terms because of a dispute

Narrative descriptions of:

• the business’s standard payment terms, which must include
• the standard contractual length of time for payment of invoices
• maximum contractual payment period and 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

Tick box statements about:

• whether suppliers are offered e-invoicing
• whether 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
• whether the business is a member of a payment code, and the name of the code

The detail of what is required

Statistics

For each of the statistics required in this section, the number entered into the online reporting service should be a whole number, without decimal places. Round up for figures over and including .5, and round down for figures below .5.

Business rates should not be included in the report.

The first 4 statistics count the days taken to pay. The first is the average time taken to make payments in the reporting period, from the date of receipt of invoice or other notice of payment amount. The second is the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer.

For these statistics:

• day 1 is the day after the date on which the business receives an invoice or other notice of the amount to pay
• the period ends when the supplier receives the payment, unless delayed by circumstances outside of the control of the business reporting in which case it ends when the supplier would have received the payment if the delay had not occurred

Example:

Company A pays Supplier B by bank transfer which usually takes 3 working days but there is an electronic fault at the bank, so the payment takes 5 working days.

For the purposes of the reporting requirement, Supplier B should have received the payment on the third working day, if not for circumstances outside of the control of Company A.

Reporting these statistics when supply chain finance is used

There may be cases where supply chain finance is used, so that the supplier receives the payment from a finance provider or other third party rather than from the qualifying business itself.

If the supplier receives the full amount due without having to pay a fee or having any amount deducted from the payment, the date the payment is considered made is the date on which the supplier received the payment from the supply chain finance provider.

If the supplier does not receive the full amount or has to bear the cost of any fee for the supply chain finance, the date the payment is made is the date on which the supply chain finance provider received the payment from the qualifying business (discounting any delays outside of the qualifying company or LLP’s responsibility).

In all other circumstances, the date the payment is made is the date when it is received by the supplier (discounting any delays outside of the qualifying company or LLP’s responsibility).

Example 1:

Company A is going to pay its supplier, Company B, in 60 days. It offers Company B supply chain finance so that it might be paid in 15 days. This supply chain finance is cost free and Company A does not deduct any money from the final sum owed to Company B in order to use it.

Therefore, Company A could report that the number of days taken to pay Company B is 15.

Example 2:

Company C is going to pay its supplier, Company B, in 60 days. It, too, offers supply chain finance so that Company B might be paid in 15 days. However, it charges 3% of the total amount owed to use supply chain finance.

Whether Company B chooses to use supply chain finance or not, the number of days taken to pay is the day when payment is received from Company C by the finance provider.

If the reporting business does not have information about when the supplier receives the payment from the third party, payment is made on the date on which it is received by the third party from the reporting business.

Reporting these statistics where an invoice is not present

There are some situations where a supplier does not send the customer an invoice for a payment under a qualifying contract. In these cases, businesses must count the time for payment with day 1 being the day after notice of an amount for payment is received.

These situations include contracts where payment is triggered by the receipt of a time sheet setting out work carried out under an on-going contract for services.

For construction contracts in scope of the Housing Grants, Construction and Regeneration Act 1996 or the Construction Contracts (Northern Ireland) Order 1996, businesses must use the earliest point at which they have notice of an amount for payment.

This would generally be the date they receive an application for payment or, in cases where there is no application for payment, the date on which they receive a payment notice (or default payment notice) or on which they issue a payment notice – whichever is earliest. Day 1 of the time taken to pay will be the day after the day on which the business has this notice.

The average time taken to make payments in the reporting period, from the date of receipt of invoice

This is the average (mean) number of days within which payments are made under qualifying contracts during the reporting period.

To find the mean, add the number of days it took to make all payments to be reported, and divide it by the number of those payments.

All payments that are made under a qualifying contract, during the reporting period, should be included.

Invoices that a business has received but has not yet paid should not be included in the figure. These payments should be reported in the reporting period in which they are paid, should the reporting business still be in scope of the requirement.

Example:

Company A made 5 payments in 10 days, made 5 payments in 20 days, and had 5 invoices outstanding at the end of the reporting period. The outstanding invoices are not included so Company A would report that the average time taken to make payments in the reporting period was 15 days.

Five invoices × 10 days = 50 days

Five payments × 20 days = 100 days

50 days + 100 days = 150 days (time taken to make all payments)

150 days divided by 10 qualifying payments = 15 days average

The percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer

A business needs to report on what proportion of the payments they made within the reporting period, under qualifying contracts, were paid:

• between day 1 and day 30 (including day 30)
• between day 31 and day 60 (including days 31 and 60)
• on or after day 61
• outside of agreed payment terms

All payments that are made under qualifying contracts during the reporting period must be included.

Any invoices that are received but not paid in the reporting period should be recorded in the reporting period in which they are paid. For example, if an invoice was received in the middle of the reporting period and was not paid before the end of the reporting period, it would not be included in the figures for that report. It would only be included if it had been paid.

The proportion paid in each timeframe should be worked out by calculating the number of payments made within each specified timeframe as a proportion of the total number of payments made in that reporting period. The percentage will only reflect the numbers of payments made, not the value of those payments. The 3 figures should add up to 100% when entered onto the form. You may need to round each figure up or down.

Example:

Company A made 10 payments in 20 days, 6 payments in 29 days, 2 payments on day 45 and made one payment on day 60 and one on day 70. There were several payments or invoices due which were not paid.

Company A would therefore report that they paid 80% of payments in 30 days or less, 15% between 31 and 60 days, and 5% beyond 60 days. The outstanding payments would be recorded in the subsequent reporting period(s) in which they were made.

10 + 6 = 16 payments made in 30 days or fewer (80% of total 20 payments)

2 + 1 = 3 payments made between 31 and 60 days (15% of total 20 payments)

1 payment made beyond 60 days (5% of total 20 payments)

The sum of payments made during the reporting period which were paid in 30 days or fewer, between 31 days and 60 days, and in 61 days or longer

A business needs to report on the total sum of payments made within the reporting period, under qualifying contracts, during the following periods:

• between day 1 and day 30 (including day 30)
• between day 31 and day 60 (including days 31 and 60)
• on or after day 61

All payments that are made under qualifying contracts during the reporting period must be included.

Any invoices that are received but not paid in the reporting period should be recorded in the reporting period in which they are paid. For example, if an invoice was received in the middle of the reporting period and was not paid before the end of the reporting period, it would not be included in the figures for that report. It would only be included if it had been paid.

The sum paid in each timeframe should be worked out by calculating the total sum of all invoices paid in full within each specified timeframe as a proportion of the total number of payments made in that reporting period.

Example:

During the reporting period, Company A made a payment of £15,000 to on the 19th day to a supplier, paying them in full within their agreed terms. They also made a payment of £4,000 to another supplier on the 28th day, paying them in full within the agreed terms.

£15,000 + £4,000 = £19,000 was paid in 30 days or fewer

Company A made a payment of £10,000 to another supplier on the 70th day after agreeing a contact, which was paid in full within agreed terms. Company A therefore: £10,000 was paid on or after day 61

However, Company A also had a contract in place to pay another supplier £9,000 within 30 days, Company A made an initial payment of £7,000 to this supplier on the 27th day, but didn’t pay their supplier the reaming £2,000 until the 45th day after agreeing a contract.

£9,000 was not paid within agreed terms.

No payments were made between the 31st and 60th day of a contract.

£0 was paid between the 31 and 60 days

The proportion of payments due within the reporting period which were not paid within the agreed payment period

This is the percentage of the payments contractually required to be made within the reporting period, which were not paid within the agreed payment period. As payments may have been made outside the reporting period, this is a separate set of data from that required to calculate the other statistics.

The agreed payment period is the period within which the customer is required to pay the supplier. It is usually set out in the contract, but there may be instances where it depends on details in the invoice or other documents. It may be explicitly negotiated or may form part of standard contract terms.

This part of the reporting covers every payment due in the reporting period in question which is not paid in the agreed payment period. This includes invoices or payments which are under dispute, if they have not been paid in the agreed payment period.

If an invoice was already overdue at the beginning of the reporting period, it should not be included; this is because it will already have been reported in the previous report (if one was published) and does not need to be reported twice.

The length of the agreed payment periods (for example, whether this was 10 or 120 days) is not recorded in this part of the reporting. The value of any payments is also not reflected in the calculation.

Example:

Company A has a standard contract which requires it to pay suppliers in 60 days. In a particular reporting period, there are 15 payments which fall due under qualifying contracts, which were all made on Company A’s standard terms (that is, day 60 for each of these payments falls within the reporting period). Company A paid the suppliers on day 65 in 5 cases, and on day 55 in 10 cases.

Assuming there were no other payments due to other suppliers in the reporting period, Company A would therefore report that 33% of its invoices were not paid within the agreed payment period.

The percentage of payments that fall due within the reporting period which were not paid within agreed payment terms due to a dispute

This is the percentage of the payments not paid within agreed payment terms as result of a dispute under the contract due to be made within the reporting period.

The agreed payment term is the period within which the customer is required to pay the supplier. It is usually set out in the contract, but there may be instances where it depends on details in the invoice or other documents. It may be explicitly negotiated or may form part of standard contract terms.

This part of the reporting covers payments due in the reporting period in question which were not paid in the agreed payment period because of contractual dispute.

The length of the agreed payment periods (for example, whether this was 10 or 120 days) is not recorded in this part of the reporting. The value of any payments is also not reflected in the calculation.

Example:

Company A’s standard payment times are 60 days. During one reporting period, they were due to pay 10 suppliers under their standard terms.

However, Company A were not happy with the quality of goods delivered by one supplier so raised a dispute with the supplier, withholding payment until the issue was resolved.

The issue was resolved, and Company A paid the suppliers on day 71. Company also made 3 other payments outside of the agreed payment times with suppliers, however there was no dispute was raised.

Company A made 4 payments outside of the agreed terms. Only one of these was due to a dispute. Therefore, Company A would report that 25% of payments under qualifying contracts that fall due within the reporting period which were not paid within the agreed payment period due to a dispute.

One out of 4 payments were not paid within the agreed terms due to a dispute = 25%

Narrative description of the business’s standard payment terms

Standard payment terms

This refers to the business’s standard terms relating to payment for qualifying contracts. This includes the business’s standard payment terms for different types of qualifying contract.

If the business does not use standard terms then the ‘standard payment terms’ they must report on will be the most frequently used payment terms for qualifying contracts, including for different types of qualifying contract.

Businesses must give a description of the standard payment terms. Businesses could choose to include a link to their website if the full terms can be found there.

If a business has different types of standard contracts depending on the product, company size or any other variation, they should describe what the different payment terms are. For example, if a business has different payment terms for contracts with small and medium-sized companies they should describe what these terms are and how they differ from their other standard contracts.

If the business commonly agrees early settlement discounts as part of its contractual arrangements, information about this needs to be included here.

For construction contracts in scope of the Housing Grants, Construction and Regeneration Act 1996 or the Construction Contracts (Northern Ireland) Order 1996, if a business’s standard (or most frequently used) terms require the payment due date for any payment to be a particular period from a valuation, the business should include this period or formulation for calculating the period.

Standard payment period

A business must give their standard payment period, in days.

The standard payment period is the contractual length of time for the business to make payments, as set out in the standard payment terms. As above, if the business does not have standard terms, the standard payment period will be the contractual payment period in the business’s most commonly used terms for the reporting period.

If the business uses different terms for different types of contracts, they must give the periods for the different contract types, as set out in the standard or most frequently used terms for each contract type.

If a business has one standard payment period, they must input their only standard payment period. If a business has more than one standard payment period, they must input their shortest payment period in this field.

Optional: longest standard payment period

If a business has more than one standard payment period, they must enter the shortest and longest period in days using both boxes, and then describe in the Standard Payment Terms text box what each of the standard payment periods is for.

Maximum payment period

The maximum payment period is the longest period for payment that a business has agreed to in a qualifying contract entered in the reporting period. A business may choose to provide extra information about maximum payment periods.

For example, if they have different payment periods depending on the product, company size or any other variation, then they could give the maximum period for each type.

The maximum payment period entered may be the only payment period longer than the standard which the business has agreed during the reporting period; or may have been required by or specially agreed with the supplier. Where the maximum payment period entered into was unusual for the business, an explanation about why the terms were different may be included.

Any changes to standard payment terms and how suppliers have been notified or consulted on these changes

A business must disclose any variations to the standard payment terms in the reporting period. For example, a business may start the reporting period with a 60-day payment period in their standard contract but change this to 30 days 3 months into the reporting period. This sort of variation should be detailed here.

If a business indicates that there were no changes to standard payment terms in the reporting period, the published report will show a sentence to that effect.

If the standard payment terms have changed in the reporting period, a business must also report whether suppliers were consulted with or notified before the change was made, and details of the consultation and/or notification that took place.

Further information that could be included

Further information that suppliers might find useful can also be included in this section. For example, a business could voluntarily provide information on how a supplier could access supply chain finance.

Narrative description of the business’s dispute resolution process

Businesses must describe how they deal with disputes with suppliers about payments under qualifying contracts. This helps suppliers know who to contact and to understand the process they need to follow to resolve a dispute or concern.

This may be a detailed process, or simply an explanation that a complaint or concern will be considered by a particular department or job title, the usual timescale and next steps.

If a business has a dispute resolution process already published on their website, they could include a hyperlink here alongside a brief explanation of the process. If they do include a link to their website, they should also include contact details for a department who can help in case of changes to the website or compatibility issues.

A business could also choose to include information about the correct place to address invoices to, and contact details for their accounts, finance or legal departments, as appropriate.

Statements (Yes/No)

Whether suppliers are offered e-invoicing

Businesses must state whether their payment practices and policies in relation to qualifying contracts which apply to the reporting period provide for invoices to be submitted and tracked electronically, such as with invoice document management systems software.

Invoice document management systems software allows documents to be electronically exchanged and means a more streamlined process with less manual intervention. This can make the process of payment faster for the supplier.

Whether supply chain finance is available to suppliers

Businesses must state whether their payment practices and policies in relation to qualifying contracts include an arrangement under which a supplier which has submitted an invoice can receive payment of the invoiced sum from a finance provider earlier than the agreed payment date, with the business paying the invoiced sum to the finance provider.

Further information on how a supplier could access supply chain finance could be included in the standard payment terms narrative box, but this is not a requirement.

Whether the business’s practices and policies cover deducting sums from payments as a charge for remaining on a supplier’s list

Businesses must state whether their practices and policies cover deducting sums from payments under qualifying contracts, for suppliers to remain on a preferred supplier list.

Example:

Company A has a list of suppliers it uses regularly and to which it offers contracts first before looking elsewhere. To remain on this list, suppliers must agree they will accept a reduced amount of money for the invoice/s.

Whether the business has deducted sums from payments as a charge for remaining on a supplier’s list in the reporting period

Businesses must state whether they have deducted sums from payments for remaining on a preferred supplier list in the reporting period.

Whether the business is a member of a payment code, and the name of the code

A payment code is a voluntary initiative, where signatories agree to undertake certain behaviours as a mark of good practice. The Prompt Payment Code is an example of this; signatories undertake to pay suppliers on time, give clear guidance to suppliers and encourage good practice.

The reporting business needs to confirm if it is a signatory of a payment code. If the business is a signatory, the name of the code should be reported.

Where the information needs to be reported

The web service

The government has provided a web service for businesses to publish the information. Reporting businesses will find the links to the web service on the Business payment practices and performance: reporting requirements page.

To publish a report, you will need a Companies House Online account. Please note that older WebFiling and WebCheck service login details will not work. Users should re-register for the Companies House Single Service to get new login details.

Registering for a new account does not change your company authentication code (used to submit you Confirmation Statement through Webfiling), which remains valid for the new service.

If you do not have an authentication code, you will need to log in to your Companies House Online account and select ‘Request an authentication code’. The code can take up to 5 working days to arrive by post.

This process is dealt with by Companies House. If you have issues with the login process or authentication codes, please contact Companies House directly – [email protected].

How to view published reports

Suppliers, and other interested parties, will be able to view the information as soon as a business publishes it. Search and view published reports.

Incorrect reports

Reports cannot be amended once published. You will need to publish a corrected report and then contact [email protected] to request deletion of the incorrect report. Please quote the reference of the incorrect report from the confirmation email.

You do not need to wait for a report to be deleted before publishing a revised one and we would recommend that you publish the corrected report before requesting a deletion.

Reporting time period

Reporting period

What a reporting period is

Businesses in scope must prepare and publish information about both the payment practices and policies which they have applied during a reporting period and their payment performance in that reporting period.

In a financial year there are normally 2 reporting periods. The first is the 6 calendar months starting on the first day of the business’s financial year. So, if a financial year started on the 5th of a month, the last day of that reporting period would be the 4th of the month, 6 months later. The second reporting period starts on the day after the first period ends and runs until the end of the financial year.

Example 1:

If a business’s financial year starts on 1 January, their first reporting period would begin on 1 January, and end on 30 June. Their second reporting period would start on 1 July and end on 31 December.

Example 2:

If a business’s financial year starts on 20 March, their first reporting period would begin on 20 March, and end on 19 September. Their second reporting period would start on 20 September and end on 19 March.

Reporting periods that start at the end of a month

The same approach is taken for financial years which start at the end of the month, unless this is impossible. For example, if a business’s financial year starts on 31 January, their first reporting period would begin on 31 January and end on 30 July, for example, at the end of the sixth calendar month.

If a business’s financial year is shorter or longer than a calendar year

Businesses’ financial years generally last 12 months. However, businesses may occasionally extend or shorten the accounting period which determines the length of their financial year. This section covers situations where a business’s financial year is particularly long or short.

If a business financial year is 9 months or shorter, they will need to report only once for that financial year.

If a business’s financial year is longer than 15 months, they will need to report 3 times:

• the first reporting period will cover the first 6 months
• the second report will cover months 7 to 12 of the financial year
• the third report will cover the remainder of that financial year

When the reporting information must be published

The information required must be published within 30 days of the end of the reporting period. The first day of the filing period in which the information must be published is the day after the last day of the reporting period to which the information relates.

Further information

Businesses that are in scope but do not have any qualifying contracts for the reporting period

Businesses that are in scope but do not have any qualifying contracts still have an obligation to report under the regulations, but most of the information required will not apply as it relates to qualifying contracts.

These businesses will still be required to publish through the website but have significantly fewer questions to answer.

Treating payments made by direct debit, credit notes, or credit/procurement cards or cheques

Direct debit payments should still be included:

• where the invoice has been paid in full through a Direct Debit arrangement, then the invoice will be shown as paid on the date the supplier receives the cash
• where an invoice is set out to be paid over twelve-monthly instalments then each payment date would count as ‘the other notice of payment date’. ‘Day 1’ would then be the day after the monthly payment due date and the payments would be reported on a monthly basis

With regards to credit notes, invoices for which no payment is required because they are covered completely by a credit note would not count as a payment for the purposes of the statistics about payments made (for example, the average time taken to pay and the proportion paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer).

For payments made by credit or procurement cards, you will need to add on any extra days between the payment being made and the supplier receiving cleared funds.

Credit and procurement card payments should only be reported on where credit terms have been offered – for example, if an employee has to settle a hotel bill before leaving and a credit/procurement card is used, this would not be reported on. If the company is billed at a later date after the employee’s stay, this would be reported on.

For payments made by cheque, the business will need to add on the standard time taken for a cheque to clear.

Any additional days taken for cleared funds to reach the supplier do not need to be counted: for example, if a supplier is sent a cheque but waits a week to bank it, the reporting business only needs to include the extra days it would have taken for the cheque to clear if it would have been banked immediately.

Businesses with an understanding with a supplier that payment time may vary depending on the timing of the monthly payment cycle

Businesses may have set days on which they make payments to suppliers. This may form part of their contractual agreements with suppliers, or it may not.

If it is contractually agreed that payment will be on a certain day in the month subject to specified conditions, then this would form part of the agreed terms.

Example:

Company A has contractually agreed terms to pay Supplier C on the 15th of the month. It is also agreed that invoices must be received by the 1st of the month in order to ensure payment in that month. Otherwise, payment will be on the 15th of the following month.

If there is an arrangement or policy which is not contractually agreed, then this would not affect the agreed payment period.

Example:

Company B has standard payment terms that state it will pay suppliers within 30 days of receiving an invoice. However, it only pays on the 25th of the month, and invoices have to be received by the 5th of the month to be paid that month – but these arrangements do not form part of the agreement with suppliers.

Company B receives an invoice from Supplier C on the 8th of the month, and therefore pays the invoice on the 25th of the following month, 48 days after receiving the invoice. Company B would therefore have to include this invoice in its calculation of the percentage of invoices not paid within the agreed payment period (because it was paid 18 days after the end of the contractual period).

Disputing or querying an invoice or payment

Disputed invoices which fall due in the reporting period and are not paid will need to be included in the statistics that record the proportion of invoices which were not paid within agreed terms.

Any disputed invoices that have been paid in a given reporting period will be included in the statistics for that period on the average time taken to pay and in the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer.

Invoices which are partially paid without the agreement of the supplier should be reported in the same way as disputed invoices.

If an invoice is partially paid by mutual agreement, for example, in monthly instalments, the payments can be reported as having been paid in full providing the instalments are made on time. In this instance, the ‘receipt of invoice’ date would be the day after the latest instalment was paid, as with direct debits.

How the reporting requirement applies to LLPs

The reporting requirement applies to LLPs in broadly the same way it applies to companies. The Companies Act applies to LLPs, with some modifications to reflect the different structures, under the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (‘2008 Regulations’)

LLPs are in scope of the reporting requirement for a financial year if at their last 2 balance sheet dates they exceeded 2 or all the thresholds for qualifying as a medium-sized LLP, under the Companies Act (section 465(3)) as applied by the 2008 Regulations. This means that LLPs would have to report for a financial year if they exceeded at least 2 of the thresholds in both previous 2 financial years.

No LLP is required to report in its first financial year. An LLP will be in scope of the duty in its second financial year if in its first financial year it exceeded 2 or all of the thresholds described above. LLPs should refer to the section on who needs to report when considering whether they are in scope of the reporting requirement.

Reporting if your business’s financial year is not 12 months

If your business’s financial year is not 12 months, the turnover threshold must be proportionally adjusted. So, when checking whether your business’s turnover exceeded the relevant threshold on the last 2 balance sheet dates, you should check your business’s turnover against a pro-rata threshold.

Example:

A business has a financial year of 11 months. The turnover threshold will be £33 million (£36million divided by 12 months, multiplied by 11 months). If the business had a financial year of 380 days, the threshold would be a rounded £37.48 million (£36 million divided by 365 days, multiplied by 380 days).

The threshold for balance sheet total is not adjusted for a longer or shorter financial year. The balance sheet total for each financial year means the aggregate of the amounts shown as assets in the business’s balance sheet.

To calculate whether your business has exceeded the threshold regarding the number of employees, you need to calculate the average number of persons employed in the financial year. The threshold itself is not adjusted for a longer or shorter financial year.

Recording multiple line invoices which include financial services or other payments which are not in scope

If an invoice covers a number of payments to be made under different contracts, then those payments would be counted separately. If one of the contracts was not in scope of the reporting duty, the payment to be made under it would not be included. Those invoices without any payments to be made under qualifying contracts will not need to be included in a business’s report.

Recording invoices that are offset against an amount owed by a supplier

Invoices that are offset completely would not count as a payment for the purposes of the statistics about payments made (for example, the average time taken to pay and the proportion paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer).

Invoices that were part paid and part offset would be included in the figures. In order to provide accurate information to suppliers, we would expect to see information about offsetting in the information about standard terms.

Considering working days when calculating

The legislation does not stipulate that calculations of length of time should only consider working days. We therefore interpret the legislation as including weekends/bank holidays.

How to consider payments made in the reporting period

The statistic ‘proportion of payments due within the reporting period which were not paid within the agreed payment period’ specifically covers all invoices that were paid late. It refers to the percentage of the payments contractually required to be made within the reporting period, which were not paid within the contractually (?) agreed payment period.

This includes payments not made in full in the agreed time and will also include disputed invoices. This statistic could include invoices received before the reporting period if the payments are due to be made in the reporting period.

For the statistics on ‘the percentage of payments made within the reporting period which were paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer’ all payments made under qualifying contracts during the reporting period must be included. Any invoices that are received but not paid in the reporting period should be recorded in the reporting period in which they are paid.

Recording intercompany payments

A contract qualifies if it is between 2 or more businesses. Businesses should report at individual entity level, for example, if there are 2 businesses within a group that qualify, they must report on their payments under qualifying contracts between one another.

If it is a payment within the same individual business, then this would not need to be included.

Legal firms and including information on payments made on behalf of clients

The statutory reporting requirement requires qualifying companies to report on payment practices and performance under their qualifying contracts. Whether particular payments need to be covered in the reports depends on whether the payments are for goods, services or intangible property under a qualifying contract.

If a company makes any payments for client disbursements under a qualifying contract with the relevant supplier, then these should be reported on. If payments are made under qualifying contracts to which a company is not a party, or payments are not made under a qualifying contract, then those payments would not be included in that firm’s reports.

Any payments which are made by a company for goods, or services under a qualifying contract, do need to be reported.

Example 1:

Legal Firm A is a reporting business. It pays court fees on behalf of a client however as Legal Firm A does not have a contract with the court, it does not report on this payment to the court.

Example 2:

Legal Firm A has a contract with a printing company, Company B. It prints a 1,000-page document on behalf of a client which it treats as a disbursement due to the high cost.

The payment to Company B must be reported on as there is a contract between Legal Firm A, despite this payment being on behalf of a client.

Reporting requirement in relation to charities

Companies that are not formed and registered under the Companies Acts will not have a duty to report.

For companies that are formed and registered under charities legislation and also under the Companies Acts, the issue is whether the relevant entity is also defined as a ‘company’ under s1(1) CA 06. If so that entity is subject to a duty to report on their payment practices.

Most charitable companies are limited by guarantee and formed and registered under CA 06, and so will have a duty to report if they meet the criteria for a ‘qualifying company’ in the regulations.

If there is no written contract

A contract does not have to be written, although it is advisable to detail important terms in writing to avoid disputes later on. A contract can be written, verbal or partly written and partly verbal. A contract may be defined as an agreement between 2 or more parties that is intended to be legally binding.

When a business buys goods or services from another business, both parties generally enter into (or act under) a contract.

If your report is going to be late, or you are unable to report

Please contact us by email [email protected] to let us know the difficulties you are having.

If your report is going to be late, please inform us to avoid further action.

Late reports should be made via the web portal in the usual way.

If you have submitted an incorrect report

Please contact us by email at [email protected] with the reference number of the incorrect report. You will find this on the confirmation email.

I have payment statistics to enter but could not access that part of the webform, and was only asked if the company was a member of a payment code

You may have answered the first 2 questions incorrectly. Please submit a new report, ensuring that you answer YES to the questions about whether the company entered into any qualifying contracts and whether the company made any payments in the period.

Glossary

Business

For ease of reference, companies and LLPs are referred to as businesses throughout this document.

Company

In the context of the reporting requirement, ‘company’ means a company formed and registered under the Companies Act 2006 or previous legislation.

Designated member

A designated member is a member of an LLP who is specified as a designated member in the incorporation document or otherwise in accordance with an agreement with the other members, as required under the Limited Liability Partnerships Act 2000.

Designated members perform certain duties in relation to the legal administration of an LLP that would, for a company, be performed by the secretary or directors.

Director

For the purposes of this requirement, a director is a person occupying the statutory office of company director, who has legal duties in relation to the company and can sit on the Board. It does not matter what the person’s title is, but whether they occupy this position.

The same definition is used for the reporting requirement as under the Companies Act 2006 (section 250), which applies for Companies House purposes.

Financial services

For the purposes of the reporting requirement, ‘financial services’ has the same meaning as in section 2 of the Small Business, Enterprise and Employment Act 2015, and means any service of a financial nature.

This includes (but is not limited to)

(a) insurance-related services consisting of:

(i) direct life assurance

(ii) direct insurance other than life assurance

(iii) reinsurance and retrocession

(iv) insurance intermediation, such as brokerage and agency

(v) services auxiliary to insurance, such as consultancy, actuarial, risk assessment and claim settlement services

(b) banking and other financial services consisting of:

(i) accepting deposits and other repayable funds

(ii) lending (including consumer credit, mortgage credit, factoring and financing of commercial transactions)

(iii) financial leasing

(iv) payment and money transmission services (including credit, charge and debit cards, travellers’ cheques and bankers’ drafts)

(v) providing guarantees or commitments

(vi) financial trading (see below)

(vii) participating in issues of any kind of securities (including underwriting and placement as an agent, whether publicly or privately) and providing services related to such issues

(viii) money brokering

(ix) asset management, such as cash or portfolio management, all forms of collective investment management, pension fund management, custodial, depository and trust services

(x) settlement and clearing services for financial assets (including securities, derivative products and other negotiable instruments)

(xi) providing or transferring financial information, and financial data processing or related software (but only by suppliers of other financial services)

(xii) providing advisory and other auxiliary financial services in respect of any activity listed above (including credit reference and analysis, investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy)

In (b)(vi) above, ‘financial trading’ means trading for own account or for account of customers, whether on an investment exchange, in an over-the counter market or otherwise, in—

(i) money market instruments (including cheques, bills and certificates of deposit)

(ii) foreign exchange

(iii) derivative products (including futures and options)

(iv) exchange rate and interest rate instruments (including products such as swaps and forward rate agreements)

(v) transferable securities

(vi) other negotiable instruments and financial assets (including bullion)

Limited Liability Partnership

In the context of the reporting requirement, ‘LLP’ means a limited liability partnership registered under the Limited Liability Partnerships Act 2000.

Parent company or Parent LLP

Any company or LLP which has one or more subsidiaries is a parent company or LLP. Subsidiary

A subsidiary is an undertaking (which could be a body corporate such as a company or LLP, a partnership or an unincorporated association carrying on a trade or business) controlled by a company or LLP (a parent).

This can be where the parent:

(i) holds a majority of the voting rights in the subsidiary

(ii) is a member of the subsidiary and has the right to appoint or remove a majority of its board

(iii) is a member and controls alone, under an agreement with other members, a majority of the voting rights

(iv) has the right to exercise a dominant influence over the subsidiary due to provisions in the subsidiary’s articles or a control contract, or

(v) has the power to exercise or actually exercises, dominant influence or control over the subsidiary, or both the parent and subsidiary are managed on a unified basis

See the Companies Act 2006, section 1162 and Schedule 7 for full details.