Small Business Commissioner offered the power to fine late payers, finally

Long-sought financial penalties for large companies that faill to pay their smaller suppliers -- like contractors -- on time, have finally been tabled by the government.

In its response to October’s consultation, the government says that the Small Business Commissioner (SBC) could, for the first time, impose fines on large outfits who pay late.  

MPs on the BEIS Select Committee for Small Business and Productivity gave the prospect of financial penalties for corporate late-payers traction in December, by recommending it.


But concerns that without the ability to issue financial sanctions, the commissioner would be ‘toothless’ date back to before its office was set up, and to before Paul Uppal was appointed.

Now, replies from micro-firms and others to the October consultation totalling almost 300 – the most responses BEIS has ever had on the issue, seem to have prompted officials to agree.

In particular, they acknowledge that the SBC’s existing power of issuing “non-binding” pay recommendations (where payment has not materialised) is widely seen as “weak.”

'Does not provide confidence'

This current power “does not provide confidence to SMEs” – the businesses or suppliers who are out-of-pocket, “that action will be take on complaints raised,” the officials say.

So BEIS will now “explore” whether the commissioner should be able to impose “sanctions” in relation to the undertaking of “binding” payment plans, and where payment is not made.

The caveat is that fines would only be issued in “certain specific circumstances” and on-message, Kelly Tolhurst MP endorsed a  “holistic approach” in the consultation response's foreword.

'Imbalance of power'

Moreover, sanctions are not a silver bullet according to the respondents. When asked for one addition to improve the Prompt Payment Code (PPC), only a fifth said monetary penalties.

Much more of a consensus was expressed by small suppliers around why they set long payment terms, and why they choose not to chase customers when they don’t pay.  

In fact, “imbalance of power” was the resounding answer, given by170 respondents asked why their terms are so long, yet cited also as a “major” cause of not pursuing non-payers .

'Commercial reprisal'

“Currently the commissioner can only act on a complaint from a small business, many of which fear commercial reprisal for raising an issue.

“Therefore, we also plan to seek views in the consultation on whether the Small Business Minister should be able to refer a matter to the commissioner for inquiry,” BEIS says.

The SBC will also be the subject of a consultation on granting his office the power to impose fines for those large outfits who do not comply with the Payment Practices Reporting Duty.

Meanwhile, responsibility for the PPC will move to the commissioner, so the “tools to tackle late payment [will be] under one organisation.” Currently, industry body CIM polices it.

'Getting away with it'

For other industry players, including those supporting contractors, the real move is by a government ignoring age-old calls to beef up the SBC, to a government finally looking at it.

“The late payment culture that so many big businesses get away with needs to change,” says Andy Chamberlain of contractor body IPSE.

“For the two thirds of self-employed people who experience it, late payment means no income, empty bank accounts, debt and possibly destitution. [The business department’s] announcement is a welcome step in the right direction.”

The CBI is similarly supportive but measured, almost seeming to imply that late payment as a problem is less prevalent than it was, and so fines for late payers would need care if adopted.

'Just about managing'

“Where performance isn't up to scratch, firms are moving swiftly to improve their practices, in line with their legal reporting responsibilities,” the employers’ organisation said.

"We look forward to working with the government and Small Business Commissioner to ensure any new powers are used proportionately and constructively to accelerate the progress now being made on eradicating late payment."

However, many small suppliers are still “just about managing to cope with the persistent and debilitating impact bullying and being paid late has”, says the Federation of Small Business.

“What these [small] firms need is one more push to get the changes that will turn the tide against this unjust and unfair behaviour,” the federation said, referring to the tabling of fines.

“Taking real action to tackle poor payment practices can be the legacy that…prime minister [Theresa May] and her government leave office with.”


Peter Kubik, recovery partner at UHY Hacker Young said: “Whilst a deterrent for businesses, these [proposed] fines do little to help recipients of late payments. For those small businesses who have already waited three months to get paid, the damage has already been done.”

“There is also the worry of whether the fines will be substantial enough to deter large businesses from delaying payments to suppliers. The new approach relies on large businesses to self-report their payment practices and this will need to be closely monitored.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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