Who Needs to Report?
To be classified as a large business for this regulation, a company must meet two out of the following three criteria:
- An annual turnover of more than £54 million
- A balance sheet total (assets) of more than £27 million
- 250 or more employees
If a business hits any two of these in two consecutive financial years, they are then required to start reporting from the third year onward. This requirement applies to financial years beginning on or after 6th April 2017, meaning it has now been in effect for several years, although many businesses are still catching up with the details.
The Consequence of Non-Compliance
Importantly, failure to comply with the Duty to Report is not just a regulatory oversight; it is a criminal offence. Both the business and each director can be held legally responsible, and the offence carries the potential of an unlimited fine.
Over the past 12 months, the Department for Business and Trade has begun actively identifying and contacting companies that appear to be non-compliant. More than 500 businesses have been written to, and while some no longer meet the thresholds and are therefore exempt, around 51% have responded and resumed reporting. For those who continue to ignore the regulation without a valid reason, prosecution is being considered.
What's the Business Response Been Like?
Although the regulation carries serious consequences for non-compliance, the Department for Business and Trade takes a constructive approach to enforcement. When companies engage and acknowledge the challenges they face, whether due to outdated systems or gaps in internal processes, there is a willingness to support them in working towards compliance. A significant number of businesses are simply unaware of the regulation, which is why ongoing communication and outreach remain a priority.
Feedback from the business community has been mixed. The introduction of the regulation has led to some positive changes, including a noticeable drop in the rate of late payments, down from approximately 25% to 18%. However, many organisations continue to face difficulties adapting to the regulation. In certain sectors, payment terms are being shortened in line with better practices, while in others, the opposite trend is emerging. This variation highlights the complex and inconsistent nature of payment behaviours across industries.
Why Systems and Technology Matter?
One of the most important takeaways from the session was the role that systems and digital processes play in ensuring compliance. Businesses that have strong finance systems in place, capable of extracting and analysing data on payment practices, this may them with their reporting obligations.
There have been examples of companies that were able to respond to the Department’s letters quickly, retrieving the required data within days. In contrast, others reported internal difficulties that slowed their response, often due to outdated processes or fragmented reporting structures. In this context, moving toward digital tools and streamlined systems isn't just about operational efficiency; it’s increasingly a compliance necessity. The businesses that succeed under the Duty to Report framework are typically those with the infrastructure in place to monitor and report on payment practices with ease and accuracy.
Support Through the Fair Payment Code
The Fair Payment Code also plays a supportive role in helping businesses improve their payment practices. Those recognised under the scheme receive guidance and support from the Office of the Small Business Commissioner, which administers the Code on behalf of the Department for Business and Trade. This support can include assistance with improving systems and processes to progress from Bronze to Silver, or Silver to Gold. It’s a collaborative approach that reflects the voluntary and incentive-led nature of the code.
For more information, visit:
http://www.gov.uk/check-when-businesses-pay-invoices
https://check-payment-practices.service.gov.uk/publish/
https://www.gov.uk/government/publications/business-payment-practices-and-performance-reporting-requirements
Or you can email the team: paymentpracticesreporting@businessandtrade.gov.uk
