Large businesses could be fined, and their directors even prosecuted for failing to pay freelancers and small businesses on time, the Department for Business, Energy and Industrial Strategy (BEIS) announced today.
The consultation response, unveiled by small business minister Kelly Tolhurst, proposed measures to improve payment culture and increase transparency.
One of the proposed measures is to take a tougher approach to company boards that fail to report their payment practices. In serious cases, that could mean using existing legislation to prosecute company directors.
BEIS has also proposed giving new powers to the small business commissioner, which include compelling the disclosure of payment terms and practices, imposing financial penalties and binding payment plans on large businesses found to have unfair payment practices.
Another suggestion is to move the voluntary code of best practice – the Prompt Payment Code – to the small business commissioner. BEIS claims that this will put all the tools to tackle late payment under one organization and will ensure the commissioner has the powers to affect culture change.
Other proposals in the report include a new fund to encourage businesses to use technology to simplify invoicing, payment and credit management.
Tolhust said: “The vast majority of businesses pay their bills on time, with the amount owed in late payments halved over the last five years. But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.
“Small businesses are the backbone of our economy and through our modern Industrial Strategy we want the ensure the UK is the best place to start and grow a business. These measures will ensure that small businesses are given the support they need and ensure that they get paid quickly – ending the unacceptable culture of late payment.”
IPSE’s deputy director of policy, Andy Chamberlain, said: “The late payment culture that so many big businesses get away with needs to change. For the two thirds of self-employed people who experience it, late payment means no income, empty bank accounts, debt and possibly destitution. Today’s announcement is a welcome step in the right direction.”