New Late Payment Bill Aims to Strengthen Protections for Small Businesses

The government has taken another step towards tackling the long-standing issue of late payments by introducing the Small Business Protections Bill to Parliament.

First announced in the King's Speech, the proposed legislation is designed to improve cash flow for smaller businesses by introducing stricter payment rules for larger organisations and giving greater powers to enforce them.

Key Measures in the Bill

If passed, the legislation will introduce a number of significant changes, including:

• A maximum payment term of 60 days for large businesses paying small suppliers.

• Mandatory interest on late payments, set at 8% above the Bank of England base rate.

• A ban on withholding retention payments in construction contracts.

• Enhanced powers for the Small Business Commissioner, including the ability to investigate poor payment practices, arbitrate disputes and issue fines to persistent late payers.

• Greater transparency for large companies, with boards or audit committees required to explain their late payment performance and outline the steps being taken to improve.
  

Why This Matters

Late payment continues to be one of the biggest challenges facing small and growing businesses. Delayed invoices can place unnecessary pressure on cash flow, limit investment opportunities and create uncertainty for business owners.

The proposed reforms are intended to encourage fairer payment practices, improve accountability among larger organisations and provide smaller suppliers with stronger legal protections.

What Happens Next?

The Bill must now progress through the Parliamentary process before becoming law. Businesses should monitor developments closely, as the new rules could have a significant impact on payment terms, contract negotiations and cash flow management.

We'll continue to keep clients updated as further details emerge, including when the new measures are expected to come into force.

If you'd like advice on improving your cash flow, managing outstanding debts or understanding how these changes could affect your business, the team at SJC Chartered Accountants is here to help.