UK Contractors: IPSE launches new report to tackle late payment

The issue of late payment is one that will, unfortunately, be familiar for many smaller sized businesses, such as Limited companies.

However, the IPSE (the Association of Independent Professionals and the Self-Employed), has launched a new report which outlines steps to combat the ‘scourge of late payment’, which currently troubles the UK’s 4.6 million self-employed.

The document outlines three main proposals that IPSE will present to government designed to simplify the resolution of late payment disputes and provide legal mechanisms to prevent late payment occurring.

Simon McVicker, Director of Policy and Public Affairs at IPSE, explained, ‘’Late payment is a crucial issue for small businesses and the self-employed. It jeopardises financial security and damages reputations, thereby reducing the likelihood the self-employed will be engaged again.

‘’Currently the balance of power goes significantly against the self-employed who have little influence to resolve disputes against larger clients or customers. To better encourage payment on time, prevention is better than cure.’’

The measures are spearheaded by the introduction of a Small Business Conciliation Service to resolve disputes over late payments.

‘’The service would provide free advice or formal mediation and conciliation for a small fee, preserving business relationships and avoiding the need for disputes to reach small claims courts.

‘’ Not all disputes can be solved amicably and it is vital that a conciliation body is created to protect small businesses from late payment and offer a simple service to resolve disputes.’’

The legal sanctions around late payment must be strengthened.

‘’Action should be taken against the weak legal sanctions around late payment. No business should be paid more than thirty days late – every day a payment is late should be subject to interest. Automatic fines must be applied of up to 10% of the contract where a payee still fails to pay up after 60 days. Payments terms of longer than 30 days should be outlawed.

‘‘Applying effective legal sanctions and cumulative interest would provide extra incentive for firms to pay on time and make 60 or 90 day payments no longer the norm.’’

Resolving the Prompt Payment Code

‘’The prompt payment code should be made stronger with incentives to stick to the rules provided. We propose that commitments must include to pay interest rates above the legal minimum, publishing an annual report on company performance and ensuring all government suppliers and their subcontractors sign up to the code.

‘’A stronger voluntary commitment from government and businesses will make the Prompt Payment Code more transparent, more effective, and more respected and will go a long way to improving the business landscape in the UK.’’

How does tax work for a Limited company? Read our plain English guide to Contractor Tax here.

If you have any questions about contracting or would like further tax and Limited Company advice please contact our New busines team on 01442 275789 or email newbusiness@sjdaccountancy.com.

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