In our previous briefing we provided details of the anticipated shape of the new Payment Practices Regulations, the regulations to be made under Sections 3 of the Small Business, Enterprise and Employment Act 2015, and what companies could be doing at an early stage to prepare.
The duty will apply to large companies and it is strongly anticipated that it will be restricted to quoted companies. It is also anticipated that the Companies Act definition will be used to determine the threshold of “large”. Subject to amendment prior to enactment of these Regulations this would mean a company would fall within the reporting requirement if it has any two of: a turnover greater than £25.9 million; total assets on balance sheet greater than £12.9 million; and an average number of employees exceeding 250.
It had previously been reported that this was due to come into force in October 2016. However, BEIS has now said that the section 3 duty (and presumably the regulations made under it) are now due to come in to force from 6 April 2017, with the first companies subject to the reporting obligation being those with financial years starting on or after this date.
The representative of the Department said:
"The duty is due to come in to force from 6 April 2017 for financial years starting on or after this date. The 6 April 2017 date is a departure from the planned implementation date, but a necessary one, to allow the Government to carry out further research and analysis to make sure that the reporting requirement is right for all businesses.
"We are taking the time to make sure the reporting requirement is effective once it comes into force. It must provide small businesses with the information they need without adding any unnecessary burdens to businesses that need to report.
"We will publish online resources, including guidance, to help businesses understand the data reporting obligations ahead of them coming into force. This will improve the accuracy and reliability of data collected."
BEIS had issued no further communications on the content of this Regulation since Sajid Javid MP’s speech in May 2015, so this latest clarification will no doubt be welcomed by businesses which were anticipating implementation in October 2016 with some uncertainty. It will be interesting to see whether new draft Regulations will be published and the extent to which these will differ from the original draft Regulations which were part of the Government's consultation last year on "Business payment practices and policies: duty to report".
This article was written by associate Lloyd Nail.