Small Business Protections Bill introduced to Parliament

Landmark legislation has been introduced to Parliament that will give small businesses, sole traders and freelancers greater protections from late payments by larger firms.

38 businesses every single day because they are not paid on time, while late payments also force business owners to spend time chasing invoices, rather than growing their businesses. The Small Business Protections Bill (formally known as the Commercial Payments Bill) will put a clear duty on large firms to pay smaller suppliers on time.

Reforms set out in the Bill include a clear 60-day?cap on payment terms?on all large firms paying smaller suppliers; mandatory interest on late payments, set at 8% above the Bank of England base rate; and a ban on the practice of withholding retention payments under construction contracts. Boards or audit committees of persistently late?paying large companies will also be required to publish clear explanations of poor payment performance and the steps they are taking to improve it.

Additionally, the Bill will give the Small Business Commissioner major new powers to investigate payment practices, adjudicate disputes and levy fines for the businesses that are consistent late payers.

The Bill builds upon and strengthens legislation first laid out in the 1998 Late Payment of Commercial Debt Act, over 25 years ago, to give us the strongest legal framework on late payments in the G7.

Reforms have been designed following close working with the Federation of Small Businesses (FSB). FSB Policy Chair Tina McKenzie said:

“Tackling late payment is one of the biggest things the government can do to help small businesses grow. FSB is proud to have worked with ministers on these reforms and it’s encouraging to see the voice of small firms reflected in legislation. Giving audit committees a clear role in payment practices is a vital step in changing late payment culture.”