EU late payment rules ‘should be fast-tracked’

An EU directive on late payment that imposes a minimum fixed sum of compensation for the slow-to-get paid must be brought forward, to take effect in the UK from next year, not 2013 as required.

Sounding the call, coalition MPs said the regulations should be fast-tracked from the EU-wide commencement date, with the effect that they would apply to Britain’s public and private organisations from 2012.

It would mean that, from as early as next year, end-users would not be able to set payment terms of more than 60 days on commercial contracts, unless such a period was explicitly agreed with the supplier beforehand.

Terms in excess of 60 days will, in the main, face the prospect of being torn down in the courts, being deemed “grossly unfair” or unlawful, one of the ministers pushing for the fast-tracking has said. 

That’s because standard payment terms under the directive are no longer than 30 days, and, for the smallest firms, include an 8 per cent interest charge on overdue invoices, in addition to a £35 fee for costs.

The Liberal Democrat’s Lorely Bert said the UK government could even reduce the standard threshold at which payment is made to suppliers from 30 to 10 days, if officials succeed in challenging their EU counterparts.

The MP for Solihul appears keen to help the smallest of businesses, particularly one-person contractor companies. “The Federation of Small Businesses suggests that we should introduce a social clause for sub-contractors.

“First-tier suppliers are often paid promptly but keep the little guys further down the supply chain waiting,” she told the House of Commons last week.

“If first-tier suppliers are being paid quickly it should be extended to everyone down the supply chain, and the further down the supply chain a business is the more important prompt payment is to it.”

The MP’s thinking will please PCG, the freelancing trade group, which regards the EU-inspired rules as a “powerful adjunct” to current legislation and codes in the UK that support prompt payment.

·But seeming aware of perceived problems with the UK’s existing late payment legislation, the group also said it wants the payment of compensation and charges to be automatic (on the part of the customer), as it does not believe that suppliers will apply the rules for fear of losing clients.

A public consultation on the directive is due this winter, allowing for the potential passing of the rules into UK law in the first half of 2012, although the business department has reportedly stressed that any advance start date would depend on the consultation’s findings.

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