The Institute of Chartered Accountants in England and Wales (ICAEW) has expressed concerns over the UK government’s new legislation aimed at tackling late payments to small businesses and the self-employed.
The legislation requires large companies to report on supplier payment performance in their annual reports, a move ICAEW deems ineffective.
The ICAEW acknowledged the government’s intention to address late payments but warned about the approach of enforcing reporting requirements within annual reports.
The organisation argues that this approach may not effectively improve payment times and could compromise the annual report’s value.
Meanwhile, the UK business secretary, Jonathan Reynolds, has defended the new reporting requirement, stating it will enhance transparency and focus attention on the payment practices of large businesses.
Reynolds confirmed that secondary legislation would be introduced in the current parliamentary session to enforce these disclosures.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe ICAEW has questioned the suitability of using the annual report as a tool for public policy objectives, suggesting that it could lead to practical challenges and diminish the report’s coherence.
It proposes that reinforcing the director sign-off process for the existing web-based service on supplier payment practices and strengthening enforcement of current regulations would be more effective.
ICAEW head of corporate reporting strategy Sally Baker said: “We are deeply disappointed with the government’s announcement. The annual report is a prime channel of communication between directors and investors. It should not be the default location for all potential disclosures by companies.”
Moreover, the ICAEW sees greater potential in the broader measures announced by Reynolds.
These include the introduction of a new voluntary Fair Payment Code, which aims to establish a clear set of commitments for businesses to ensure timely payments.
The code will categorise businesses with official statuses based on their payment standards and will be overseen by the Small Business Commissioner.
The issue of late payments remains a pressing concern, with small businesses in the UK owed an average of £22,000 in late payments in 2022.
The ICAEW urged the government to consult with businesses and the public to advance these measures effectively.
ICAEW policy director John Boulton said: “It is positive that government is turning to this area early in the new parliament, putting substance behind the manifesto commitment to support SMEs.
“Small businesses are the lifeblood of the economy and we welcome that government is seeking action in this key area. We look forward to engaging with the consultation and contributing to the design of measures to encourage more timely payment.”
Earlier in October 2024, the ICAEW called on its members to contribute to new guidance for sustainable economic practices.
