New UK payments reporting obligations starting on 1 January 2025 - The Reporting on Payment Practices and Performance (Amendment) Regulations 2024

Following a recent Amendment¹ to the UK Reporting on Payment Practices and Performance Regulations 2017² (Regulations) which required large businesses to report their payment practices, the UK Government has extended the Regulations for another 7 years. The Regulations now expire on 6 April 2031. This Amendment builds upon the objectives underlined in the September 2019 Guidance³ and widens the existing reporting obligations to enhance transparency and compliance.

This is not a new policy area for the UK Government, late payments impose significant administrative and financial burdens on companies, particularly SMEs. Given the current pressures in the supply chain, including cash flow concerns and the wider economic situation, the reasons for these Regulations are even more prevalent. Following a statutory review and a consultation of the Regulations, the UK Government has confirmed that the Regulations will continue to be in force, with new reporting obligations applying on or after 1 January 2025, pursuant to the 2024 Amendment⁴ to the Regulations (Amendment). A further review is scheduled to take place by 6 April 2029 to assess the effectiveness of the amended Regulations. This applies in relation to each financial year of a company beginning on or after 1 January 2025.

EXISTING REPORTING REQUIREMENTS

The existing reporting obligations under the Regulations remain in force. These include the requirement for qualifying companies⁵ (companies) to report the average number of days taken to make payments, the percentage of those payments that were made within the specified time periods⁶, and the percentage of the payments due within the reporting period which were not made within the agreed payment period. Additionally, companies must continue to detail their standard payment terms, including the standard contractual length of time for invoice payments, any changes to these terms during the reporting period, how suppliers were notified or consulted about these changes, the maximum payment period specified in any qualifying contract⁷, and the process for resolving payment-related disputes. The use of 'tick box statements' remains in the online report, covering various practices and policies, including the availability of supply chain finance to suppliers, offering e-invoicing, membership of payment practice codes or standards, and policies on deducting sums from payments for remaining on supplier lists.

NEW REPORTING OBLIGATIONS

As well as extending the Regulations to 6 April 2031, the Amendment introduces additional requirements to report the following:

• the value of invoices not paid within the specified periods;
• the total sum of payments which were not made within the payment period; and
• the percentage of disputed invoices causing delays in payment, with these disputed invoices still counting as late payments for the purpose of the Regulations.

Accordingly, companies are now allowed to add context to delayed payments caused by a dispute, which was not possible under the 2017 Regulations.

ADDITIONAL AMENDMENT TO REPORTING OBLIGATIONS

• Definitions and Interpretation: Finance Provider
  The Amendment has clarified when a payment is deemed to be made to the supplier for the purpose of reporting, including when a "finance provider" is used e.g. via supply chain financing. The general position under the amended Regulations is that a payment is deemed made when it is received by the supplier. However, if there is an arrangement when the supplier receives a part payment when a finance provider is used by the company, the payment date is deemed to be the date on which the finance provider received the payment from the company (discounting any delays outside of the qualifying company responsibility). This is different to the previous position under the Regulations, which used to be the date on which the supplier received the payment from the finance provider.
• Construction Contracts
  Interestingly, the Government has noted in their Response to the Consultation in November 2023 (Response), that "where relevant", reporting must include information on standard retention payment terms and retention payment performance statistics for qualifying construction contracts. However, no specific provisions have been introduced in the Amendment to expressly refer to qualifying construction contracts. We will watch this space as reporting on construction contracts may be something that the UK Government will consider introducing in the future.

COMPLIANCE AND SANCTIONS

Failure to publish the required information or publishing false, deceptive or misleading reports or statements, whether knowingly or recklessly is a criminal offence for the company and its directors.

FIND OUT MORE

For further information or if you have any questions, please contact Mark Dewar or Marta Chodorowska, or your usual DLA Piper contact.

¹ Reporting on Payment Practices and Performance (Amendment) Regulations 2024.
² Reporting on Payment Practices and Performance Regulations 2017.
³ Duty to Report on Payment Practices and Performance, Guidance September 2019.
⁴ Reporting on Payment Practices and Performance (Amendment) Regulations 2024.
⁵ By way of a high-level summary, to be a qualifying company, companies or LLPs' need to exceeded 2 or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006 (section 465(3) or in the case of LLPs, regulation 26 of the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008). At the time of writing this article the thresholds are: GBP36 million turnover, GBP18 million balance sheet total and 250 average number of employees.
⁶ The relevant period is: (i) a period beginning on day 1 and ending with day 30; (ii) a period beginning on day 31 and ending with day 60; or (iii) the date on or after day 61. Please note day 1 is the day after the relevant day, meaning the day on which an invoice or other notice of an amount for payment is received by the qualifying company.
⁷ A qualifying contract is a contract that: (i) is a relevant contract – this is a contract for goods, services or intangible assets, made in connection with carrying on a business, which must not be a contract for financial services (Sections 2 and 3(2), Small Business, Enterprise and Employment Act 2015); and (ii) is governed by the law of a part of the United Kingdom other than by choice of the parties, or otherwise have a significant connection with the United Kingdom (see Regulation 6, Reporting on Payment Practices and Performance Regulations 2017).