Consultation on Implementing Directive 2011/7/EU on Combating Late Payment in Commercial Transactions

Government has published a guide to amended late payment legislation which comes into force on 16 March 2013. The amended legislation will make pursuing payment a simpler process across the European Union, reducing the culture of paying late and making paying on time the norm:

Late Payment Directive: User Guide to the Recast Directive

On 20 September 2012 Business and Enterprise Minister Michael Fallon published a consultation on implementing new European Union (EU) legislation to combat the problem of late payment by commercial businesses.

The Directive covers all debts incurred in commercial transactions. It applies to businesses and public authorities, whether the transactions are within the UK or across EU borders.

The UK was one of the first countries to introduce late payment legislation and is already seen as an exemplar across Europe. This consultation is on the recast Directive which will to extend existing laws and practices currently enjoyed by British businesses across the Union, creating a level playing field for UK businesses trading with other businesses and public authorities in all Member States.

The main points outlined in the EU Directive are that:

• public authorities will be required to pay suppliers within 30 calendar days of receipt of an undisputed invoice (this matches the UK Government’s standard practice for the public sector)
• for business to business payments, the period for payment fixed in the contract should not exceed 60 days, unless otherwise expressly agreed and provided such terms are not grossly unfair
• it copies current UK practice of a default payment period of 30 days, where terms have not been agreed
• there is a minimum €40 (approximately £31) for compensation (current UK legislation sets three levels of compensation payment according to the value of the payment). Suppliers will not be prevented from seeking to claim additional recovery costs.

The government is already working alongside industry bodies in the UK to encourage more businesses to sign up to the Prompt Payment Code which encourages good practice. Over 1,100 businesses have already signed up to the Code.

The consultation closed on 19 October 2012. The government’s response to the consultation was published on the 20 February 2013. It confirms the proposals we intend to take forward when implementing the Directive. Transposition of the EU late payment directive will take place on 16 March 2013.