Budget 2025
We put in a Chambers submission to the Treasury ahead of the next month’s Budget. Our main message was that there should be no new taxes on business, which is still struggling with the impacts of last year’s Budget.
Tax and inflation and their dampening impact on growth are two key concerns for business. Our submission also included the usual plea for better recognition of the East of England and its importance to the UK economy and therefore for more investment in infrastructure such as roads and rail to sustain the region’s edge.
Late payments
A consultation on late payments has recently closed and we can expect government legislation to follow. It’s a big problem, estimated to cost the UK economy almost £11 billion per year and contribute to the closure of 38 businesses every day.
Over 1.5 million businesses are affected by late payments, representing a significant drag on the country’s growth and productivity at a time when economic growth is a top priority. A healthy cash flow is critical for the survival and growth of the UK’s smaller businesses, which are the most vulnerable as they tend to be less cash-rich. Paying employees, settling their own bills with other businesses, and investing in new capital, skills and research for the future – these all depend on timely and fair payment.
The government has taken some actions, such as legislating to require large companies to include their payment performance in annual reports. This will give greater board-level oversight of payment practices and increase the transparency of large companies’ payment performance.
There is also a new Fair Payment Code, delivered by the Small Business Commissioner. This is showcasing those companies who are setting an example by paying their suppliers quickly and fairly.
And a new Small Business Commissioner has been appointed – Emma Jones CBE. The Small Business Commissioner has a statutory duty to review complaints by small businesses regarding late payments, as well as provide advice and support on issues relating to late payments and payment practices in the private sector.
Whilst these measures may be helpful they won’t be gamechangers and more will need to be done. Accordingly, the government is proposing a package of new measures, in line with its manifesto commitments, that it believes amounts to the most significant legislation to tackle late payments in over 25 years.
These measures (there are eight of them) are set out in some detail in the consultation paper but essentially take a carrot and stick approach, aiming to incentivise better payment practice and penalise those who are persistent late payers.
Some of the changes (those relating to maximum payment terms, deadlines for disputing invoices and mandatory statutory interest) will be brought about by amending existing legislation, such as the Late Payment of Commercial Debts (Interest) Act 1998. Others will give new powers to the Small Business Commissioner.
These will require new legislation but will use payment behaviour data submitted by businesses under the Reporting on Payment Practices and Performance Regulations (2017) to identify and issue financial penalties to persistently late-paying businesses, with penalties based on businesses’ unpaid statutory interest liability.
These measures support the ambition to make the UK the best place in the world to start, run and grow a business – a place where businesses are paid on time for the goods and services they deliver, a place where money flows quickly through supply chains, a place where small companies and the self-employed spend their time and resources running their business effectively instead of chasing unpaid invoices.
We must hope that a greater focus on scrutiny, transparency, identification and ultimately penalising late payers produces a change in behaviour, but it’s likely to take time.
At the Chambers we are always interested to hear businesses’ experience of this sort of issue so please get in touch if you have something to say.