Payment practices reporting – new Fair Payment Code launched

A new Fair Payment Code has been launched by the government, which aims to tackle late payments, reward good practices and ensure SMEs are paid on time.

It replaces the previous Prompt Payment Code and forms part of a new package of measure announced by the government in September 2024 to deal with late payment (see our blog post here for details of the other measures announced).

Under the new Code, businesses can apply for one of three awards, gold, silver or bronze, depending on how quickly they pay 95% of all invoices received, with the gold award being for those businesses making payment within 30 days. As part of their application, businesses will need to provide evidence of their payment performance and two references from suppliers. Businesses of any size can apply, provided that they have a registered UK address. Businesses that were previously signatories under the Prompt Payment Code will not automatically be given an award under the Code, though evidence of compliance under the Prompt Payment Code can be used as part of an application under the Fair Payment Code.

The Code does not impact on a company’s reporting obligations under the Payment Practices Reporting Regulations but if a company is not meeting its obligations under the Regulations, they will not be eligible to apply for an award under the Code.

Businesses wishing to apply for an award (which then lasts two years) need to complete an expression of interest in order to receive an application form and the application guidance. There are FAQs on the Code’s webpage setting out further information.

For more details on the payment practices reporting regime in general, see our Corporate Governance Fundamentals on Periodic Reporting outside the annual report and accounts.