The Department for Business, Energy & Industrial Strategy (BEIS) has announced various reforms to the voluntary Prompt Payment Code to tackle the ongoing issue of late payments.
The Government announced its plans to reform the Code following its call for evidence on how to create a responsible payment culture for small businesses.
The key changes to the Code are:
- a new requirement for a company’s CEO or Finance Director, or the business owner where it is a small business, to sign the Code personally to ensure that responsibility for payment practices is taken at the highest level of an organisation. This change will come into force immediately; and
- a halving of the payment period for invoices from small businesses (those with less than 50 employees). From 1 July 2021, signatories will be required to pay 95% of invoices from small businesses within 30 days. The target for payment of invoices from larger businesses will remain 95% of invoices paid within 60 days.
BEIS is also currently considering the responses to its consultation on proposals to strengthen the Small Business Commissioner’s ability to assist small businesses by enabling them to get redress in respect of late payments. The consultation closed on 24 December 2020 and the Government will publish consultation responses and take forward proposed reforms in due course. For further details on the consultation, see our earlier blog post.
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