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News » UK » New late payment legislation same as the old » published 20/09/2012

New late payment legislation same as the old

The government has published proposals to implement European Union (EU) law on late payment.

Construction companies are some of the worst offenders and greatest victims when it comes to late payment of invoices, with thousands of small firms being forced to the wall every year simply because bigger firms refuse to pay promptly.

However, they should not get too excited by the prospect of the new legislation – it is largely based on exiting UK law, which is seen as leading the way on this issue in Europe.

Implementing the EU Directive will, however, create ‘a level playing field’ for UK businesses trading with other businesses and public authorities in other EU member states, the Department for Business, Innovation & Skills said.

Business minister Michael Fallon said: “The UK already has some of the strongest late payment laws in Europe which are now being copied across Europe. This will give a real boost to UK business by providing them with the confidence and certainty they need to work with overseas suppliers.

“But legislation alone cannot deal with the issue of late payment. Businesses need to make sure they have suitable measures in place to help themselves. Tackling late payment will free up millions of pounds in the supply chain, helping to boost the economy and safeguard the future of thousands of UK companies.”

The main points in the EU Directive are that:

  • Public authorities will be required to pay suppliers within 30 calendar days of receipt of an undisputed invoice. (This matches the UK Government’s standard practice for the public sector).
  • For business to business payments, the period for payment fixed in the contract should not exceed 60 days, unless otherwise expressly agreed and provided such terms are not grossly unfair.
  • It copies current UK practice of a default payment period of 30 days, where terms have not been agreed.
  • There is a minimum €40 (approximately £31) for compensation. (Current UK legislation sets three levels of compensation payment according to the value of the payment). Suppliers will not be prevented from seeking to claim additional recovery costs.

The consultation will run until 19 October 2012. Transposition of the EU late payment directive is due to take place on 16 March 2013.

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This article was published on 20/09/2012 (last updated on 20/09/2012).

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