Government launches late payment consultation

21 September 2012

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21 September 2012 | Anna Reynolds

European rules on tackling late payments will create a level playing field for UK businesses trading with other firms and public authorities in all EU states, according to the government.

The Department for Business, Innovation and Skills (BIS) has published a consultation on implementing the Late Payment Directive, which will strengthen existing UK laws.

Main points outlined in the EU Directive are that public authorities will be required to pay suppliers within 30 days of receipt of an undisputed invoice, which 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 agreed. The legislation copies current UK practice of a default payment period of 30 days, where terms have not been agreed.

There is a minimum of €40 (approximately £31) for compensation, where as current UK legislation sets three levels of compensation payment according to the value of the payment. Further, suppliers will not be prevented from seeking to claim additional recovery costs.

Legislation is intended to create an environment for driving on-time payment and best practice dictates suppliers reference the costs of missing the due payment date in all written contracts and invoices, setting out clear expectations from the start.

The UK was one of the first countries to introduce late payment legislation and has introduced measures such as the Prompt Payment Code to speed up public sector payment and benefit suppliers.

The government is working with industry bodies in the UK to encourage more businesses to sign up to the Prompt Payment Code, with more than 1,100 businesses signed up so far.

The current consultation will run until 19 October 2012 and the UK is due to implement the EU Late Payment Directive by 16 March 2013.

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