Welcome to this special King's Speech edition of the newsletter!
It has been a big month for small business. I was delighted to hear in the King’s Speech on 13th May, the UK Government’s intent to take forward late payment legislation. At the Office we are on a mission to make life easier for small businesses by getting money moving through the economy and into their hands. This bill is a significant element of that mission.
Forgive me that I have shared this before but now it is ‘official’, this week’s newsletter is a re-cap of what the government plans to do on late payment legislation and the timeline you can expect for implementation.
Key measures
The UK will move to an economy of 60 days maximum payment terms. This means if you are a small business being asked to sign contracts with payment terms of more than 60 days, this will become illegal after the legislation is introduced. There is a strict exemption to this if a small business requests that payment terms can be longer, for example, bookshops need longer terms as they get paid when books sell, which can be longer than 60 days, but this is how that industry works.
Mandatory interest will be applied to late invoices of 8% above the Bank of England base rate (currently at 3.75%) This can be included in contracts you sign and on invoices raised. The Office of the Small Business Commissioner will be tracking interest owed and paid by larger firms through the public payment reporting data.
There will be a time limit so that invoices must be disputed ahead of the payment is due. After that time, the invoice is accepted as given.
New powers for the Office of the Small Business Commissioner will mean the Office can; Adjudicate payment disputes to support small firms get paid monies they are owed, Investigate companies that are persistent offenders when it comes to paying late, and Fine such practices. Investigations and fines will be made public.
These powers will not be retrospective ie they will apply to contracts and payments from the point at which the new legislation is introduced.
Timeline
The first reading of the Bill went ahead in the House of Lords this week to begin the passage through Parliament. It is difficult to be precise on a date by which the Bill becomes law but if there are few complications, the Small Business Protection (Late Payments) Bill, which has also been referred to as tje Commercial Payments Bill could receive Royal Assent next year.
The Office will be communicating progress at every step so as a small business, you will know your rights and as a large company, you will have what you need to be prepared.
More on this in the weeks ahead!
Emma Jones
Small Business Commissioner
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