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Are You Aware of This Tax Update?

36611225 - inaudibleThe UK tax system is very complex, often new regulations come into effect but most businesses aren’t aware of them. This is an area which we can definitely assist our clients – explaining and guiding them through the complex and ever-changing tax system. Today, we will talk about Supplier Payments which may affect you.

The news headlines “Tesco knowingly delayed payments to suppliers” were prominent last year. The good news is, techniques used by major buyers in large corporations and other significant entities to squeeze the maximum amount from relationships with suppliers are soon to be held up to wider scrutiny. A new ‘Duty to report on Performance and Payment Practices’, becoming law in April 2017, will require larger organisations to report on their payment practices every six months.

Companies who fall within the Companies Act 2006 definition of Medium companies for financial reporting purposes and LLPs (Limited Liability Partnerships) as defined by the 2000 Act of a similar scale, will be impacted by the new guidance issued in January.

Overall, this update is welcomed by smaller suppliers; though some major companies say this will add an unnecessary burden to their existing payment process.

For the interest of our readers, here are a few particulars that should be noted regarding the new requirements:

  • All results reported will be available for the public to view online.
  • The figures reported will be backward looking, referring to the previous year’s financial results. Also, reporting will need to be signed off and certified by a company director every six months (designated member for LLP’s).
  • Information is required to be made available within 30 days of the end of a reporting period.
  • Metrics to be reported on include the average payment days to suppliers, and amounts due to suppliers of 30-60 days and in excess of 60 days at the date of reporting.
  • Organisations with a Group structure will have to report metrics at an individual company level, but overseas registered companies owned by the company or Group are not required to be reported on.
  • Breeches of reporting requirements will be considered a criminal offence.
  • Certain other narrative regarding the company’s payment policy will need to be reported. This includes the company’s policy with regard to supplier disputes, and the company’s maximum payment terms under their contractual terms with suppliers.

These new requirements will impact certain companies more than others. Apart from big supermarkets which we hear about in the news, the building sector can also be notorious for deducting retention deposits from work completed, and these amounts are often not released by the buyer until months after work has been complete. So our word of advice to our clients is always, ‘be clear about the payment arrangements’.

If you would like some advice on the UK tax system or on this particular issue, contact our Tax Advice service today. You can call us at 020 8780 2349 or complete the enquiry form and we will call you right back.