
Payment Performance Update
The requirement for larger businesses on a half-yearly basis on their payment practices, policies and performance for financial years came into effect on 6 April 2017.
Businesses are in scope of the requirement for a financial year if, on their last 2 balance sheet dates, they exceeded 2 or all of the thresholds for qualifying as a medium-sized company under the Companies Act 2006 (section 465(3)). The thresholds relate to turnover, balance sheet total and average number of employees.
At the time of publication, these thresholds are:
- £54 million annual turnover
- £27 million balance sheet total
- 250 employees
The New Government has committed to extending the scope of against the following milestones:
Changes from January 2025
Under the Reporting on Payment Practices and Performance (Amendment) Regulations 2024, new reporting requirements have been introduced for companies in scope of the reporting requirement. These new requirements will apply in relation to each financial year of a company beginning on or after 1 January 2025.
These new requirements relate to:
- the sum total of payments made during the reporting period
- the percentage of payments that were paid during the reporting period which were not paid within agreed terms because of a dispute
Changes from March 2025
Under the Reporting on Payment Practices and Performance (Amendment) Regulations 2025, new reporting requirements have been introduced for companies in scope of the reporting requirement which use qualifying construction contracts. These new requirements will apply in relation to each financial year of a company beginning on or after 1 April 2025.
The requirements relate to retention practices, policies and performance where retention clauses are included in a qualifying construction contract.
These include:
- a statement on whether the payment practices and policies of the business include or do not include retention clauses
- where a business makes a statement that retention clauses are included in their construction contracts, further information must be submitted
Changes from April 2025
Under The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024, the thresholds defining a medium-sized company are changing.
This change affects the thresholds for reporting payment practices, since this definition is used to determine which businesses are in scope of the regulations.
From 6 April 2025, the thresholds for reporting payment practices are:
- £54 million annual turnover (up from £36 million)
- £27 million balance sheet total (up from £18 million)
- 250 employees (unchanged)
Businesses that meet 2 or all 3 of these criteria will be in scope to report their payment practices.
The information must be published through an online service provided by the government and will be available to the public.
Supporting Guidance
The Department for Business and Trade (DBT) has updated its guidance to the Reporting on Payment Practices and Performance Regulations setting out how companies should report on new metrics on retentions. Companies using retentions will be required to include the following information in their payment reports every six months:
- A series of statements covering the company’s policy on retentions, including when they are used, any standard terms, and the process for their release
- The amount of retention withheld by the company from its suppliers, as a percentage of the amount withheld against it by its clients
- The amount of retention withheld by the company from gross payments made to its suppliers, as a percentage of the gross amount paid to its suppliers.
The new metrics and they will apply to each financial year of a company beginning on or after 1 April 2025. This means that for companies with a financial year beginning on 1 January, their first reports containing the new metrics will be for the period 1 ‐ 30 June 2026 and need to be submitted by 30 July 2026.
The Fair Payment Code
The Fair Payment Code extends this with a voluntary committment. This replaces the Prompt Payment Code and is likely to for a mainstay of requirement for particularly Public Sector Contracts.
The Small Business Commissioner has announced the first companies to sign up to the new Fair Payment Code (FPC), which is on initial inspection, a bit thin on the ground with construction companies – John Sisk & Son, were an early signatory.
FIS encourages members wishing to apply to the FPC and complete the expression of interest form in order to receive an application form, and they will be awarded Gold, Silver or Bronze status depending on the time taken to pay invoices.