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verbally change a contract term, Michelle Dixon

Statutory Duty to Report, the Prompt Payment Code and the Construction Supply Chain Payment Charter

| Published on October 17, 2016

Statutory Duty to Report

The UK Government has been driving forward proposals to tackle late payment in business to business contracts.

The Government is encouraging large companies to lead by example in paying their suppliers promptly and fairly, with 30 day payment terms being the norm and 60 days the maximum. It also intends for companies to receive penalties for poor payment practices.

The Government announced that the proposed ‘duty to report’ on payment practices and policies will apply to large private companies, large LLPs and large quoted companies.

The statutory duty to report, introduced by the Small Business, Enterprise and Employment Act 2015 (implementing Part 1 clause 3 (Companies: Duty to Publish Report on Payment Practices) (‘the Act’), is due to come into force from 6 April 2017.

The Act provides for regulations to be implemented to create a duty on companies to report on its:

  • payment practices and policies relating to relevant contracts of a prescribed description; and
  • the company’s performance by reference to those practices and policies.

A company’s “payment practices and policies” are said to include:

a) the standard payment terms of the company and whether these are part of any code of conduct or code of ethics of the company;

b) payment terms of the company which are not standard;

c) the processing and payment of invoices;

d) reference to such codes of conduct or standards as may be prescribed and as are applicable to companies generally or to companies of a prescribed description;

e) any disputes relating to the payment of invoices, including any dispute resolution mechanism that the company uses; and

f) payments owed or paid by the company due to late payment of invoices, whether in respect of interest or otherwise.

Reporting will be on a half-yearly basis and be provided in open data format to a single, central, digital location.


The Prompt Payment Code (‘PPC’):

The Government has now introduced the voluntary PPC which was created to set the ‘gold’ standard for payment practices. Any business can sign up to the PPC.

The PPC is administered by the Chartered Institute of Credit Management on behalf of the Department for Business, Energy and Industrial Strategy.

It is expected that when the statutory ‘duty to report’ comes into force companies are likely to be obliged to state in their report whether or not they have signed up to the PPC or any other recognised payment code.

The code can be found at: https://www.promptpaymentcode.org.uk/


The Construction Supply Chain Payment Charter (‘CSCPC’):

The Construction Leadership Council (‘CLC’) has published the CSCPC which applies to all parties to a construction contract. It aims to create a more collaborative culture and ensure a strong, resilient and sustainable supply chain.

Like the PPC above, a construction business can become a signatory to the CSCPC and in doing so it agrees to “apply the fair payment commitments in its dealings with its supply chain, to be monitored for the purposes of compliance by reporting against a set of agreed key performance indicators (KPIs), and to consider the performance of its supply chain against the agreed KPIs when awarding contracts.”.

A business must be a signatory of the PPC before it can become a signatory of the CSCPC.

In the construction industry, public authorities are already required to pay within 30 days, pursuant to the Public Contracts Regulations 2015.

The CSCPC commits to paying suppliers within 60 days, although that period will reduce to 30 days by 2018.

The CSCPC can be found at: https://www.promptpaymentcode.org.uk/cscpc.htm

For further advice please contact the commercial team at our offices in Poole on 01202 725400 or Dorchester on 01305 251007.

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