Changes to the Late Payment Legislation

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8 years 7 months ago - 8 years 6 months ago #797 by David J
In February 2011, the government received Directive 2011/7/EU from the European Parliament announcing substantial changes to the Current directive 2000/35/EC on combating late payment in commercial transactions. You can view the directive here . The legislation has to be transposed by 16th March 2013. Some EU Countries have already transposed the legislation before the deadline.

The Department for Business Innovation & Skills have finally launched a consultation on implementing the EU directive 2011/EU which they say aims to strengthen the current late payment legislation in the UK. The closing date for the consultation is: 19th October 2012. The B.I.S. emphasise the main points of the recast legislation being:
  • Public authorities will be required to pay suppliers within 30 calendar days of receipt of an undisputed invoice.
  • For business to business payments, the period for payment fixed in the contract should not exceed 60 days, unless otherwise expressly agreed and provided such terms are not grossly unfair.
  • There is a minimum €40 (approximately £31) for compensation (which is less than the current three tiered compensation).
  • Suppliers will be able to claim additional costs for recovery such as using a professional debt collecting agency or instructing a lawyer.
However there is a lot more which is not mentioned to this recast than just the points above.
The recast legislation will not be reviewed again until March 2018 so it is important to read and understand the changes and how it will affect you as a business .
The Policy and Strategy team at the B.I.S. will be informed about this forum as government has stated that they are ‘committed to listening to businesses’. So your opinion counts.

Most small businesses want a stronger useable incentive to encourage prompt payment and hopefully the government want the same as their statement below suggests:

Government is committed to combating late payment.

Its overall objective is to improve the cash flow of businesses. Specifically the Government aims to:

1) Confront debtors with measures that successfully discourage them from paying late;

2) Provide creditors with measures that enable them to fully and effectively exercise their rights when paid late;


and

3) Create a level playing field across Member States.


This forum is to encourage discussions about the changes to the current late payment of commercial debts Interest act and to keep you abreast of the latest information. Usual rules apply regarding posting but please do not waste the opportunity to make a difference.

David Tyler
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5 years 9 months ago #1861 by ashley smith
On 21st June the latest amendment to Late Payment legislation came into force.

Whilst the amendment is largely for clarification stating that the maximum terms are set to 60 days (30 days for public authorities), notice should be made of the new section 2(G) and 2(I).

These sections now specify the date against which the clock starts ticking as;

“The relevant period” is the period of 60 (30) days beginning with the later or latest of—

(a) the day on which the obligation of the supplier to which the debt relates is performed;

(b) the day on which the purchaser has notice of the amount of the debt or (where that amount is unascertained) the sum which the supplier claims is the amount of the debt;

(c) where subsection (5A) applies, the day determined under subsection (5B)

On the surface this looks good, BUT section 5(A) and 5(B) still give a buyer up to 30 days to accept or verify the supply. So in theory 90 day payment terms apply. I may be wrong (please someone proof me wrong), but I do not think this was the spirit in which the legislation was intended. Furthermore isn't a period of credit supposed to allow a buyer time to review the worthiness of the supply and not merely be a mechanism for payment?

I would further be interested to see how the above legislation will be viewed in court against contractual terms which state that a payment period commences from 'receipt of an acceptable invoice'.

Your thoughts and experiences (past and present) would be of interest either here or a private message.

Further details can be found at;

www.gov.uk/late-commercial-payments-interest-debt-recovery/charging-interest-commercial-debt

www.legislation.gov.uk/uksi/2013/395/pdfs/uksi_20130395_en.pdf

www.legislation.gov.uk/uksi/2015/1336/pdfs/uksi_20151336_en.pdf
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