BEIS issues guidance to Prompt Payment Code signatories

BEIS has written to signatories to the Prompt Payment Code to clarify when "exceptional circumstances" may justify paying suppliers outside the 60 day deadline set out in the Code. BEIS states that what amounts to "exceptional circumstances" will be determined on a case by case basis, rather than by reference to prescriptive criteria. The Code Compliance Board will set the standard by examples of good practice from cases it reviews, reflecting different practices in different sectors. However, generally companies must be able to show that they give preferential treatment to all of their small suppliers (for example by paying them within a shorter period) and 60 day payment terms should be the maximum in the vast majority of cases. BEIS hopes that this flexibility will encourage more companies to sign up to the Code, which at the time of writing has 1839 signatories.

As BEIS's letter points out, when the statutory obligation to report on payment practices comes into force companies are likely to be obliged to state in their report whether or not they have signed up to any payment code (see Legal update, Small Business, Enterprise and Employment Bill: ministerial statement on reporting payment practices and policies). The reporting obligation is contained in the Small Business Enterprise and Employment Act 2015 and the letter confirms that implementing regulations are expected to come into force from 6 April 2017, for financial years starting after that date.

Source: Small Business Minister backs the Prompt Payment Code, BEIS press release, 13 September 2016.