The Prompt Payment Code invoice target will be cut in half from 60 to 30 days, it has been announced.
The move forms part of major reforms designed to “push” big businesses to pay suppliers on time.
Launched in 2008, the Prompt Payment Code is a voluntary scheme set up by the Government in response to concerns that late payments were causing some 50,000 small business insolvencies a year.
Described as the “gold standard in payment terms”, some 3,000 signatories have committed to pay 95 per cent of invoices within the current 60-day target.
However, recent research revealed that few companies are meeting the targets set out by the code.
To help tackle the problem, the reforms will see the 60-day target cut in half to just 30 days, while directors will be required to take personal responsibility by signing the code and acknowledging that suppliers can charge interest on late invoices.
Other changes include:
- introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it; and
- enabling administrators of the Code to investigate breaches based on third-party information.
As part of the reforms, the Small Business Commissioner (SBC) will also be given new investigatory powers to issue legally binding payment orders and fines.
Commenting on the changes, Small Business Minister Paul Scully said: “Our incredible small businesses will be vital to our recovery from the coronavirus pandemic, supporting millions of livelihoods across the UK.
“Today, we are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.”
The latest statistics suggest that some £23.4 billion worth of late invoices were owed to firms in 2020.
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