One of Build UK’s 5 main priorities is fair and transparent payment practices, which are essential for a successful construction industry with a strong and sustainable supply chain capable of meeting its clients’ needs.
The Duty to Report legislation requires large companies (as defined by Companies House) to submit reports on their payment performance and practices on a 6-monthly basis. For further information on the operation of the legislation please see Newsline.
Day 1 where no invoice is used
A key issue for the construction industry has been when to begin measuring payment performance where a supplier does not send the customer an invoice for a payment under a contract. This is because invoices are not widely used within the industry.
Government guidance, published in January, said that where no invoice is used, day 1 should be counted as ‘the day after the amount for payment is confirmed, whether by customer or supplier.’
Build UK has been engaging closely with the lead civil servants, highlighting the issues for construction including that the Construction Act does not mandate a period between the provision of goods and services and payment for those goods and services. In July, Build UK wrote to the Department for Business, Energy and Industrial Strategy (BEIS) making the case that Valuation Date is the most appropriate date to begin measuring payment performance from as this is the point at which the amount to be paid is agreed.
However, BEIS recently confirmed that in their view, Application for Payment should be used to determine Day 1 on the basis that ‘it is the first point that the customer has notice of what the payee considers should be paid’. The government has since published updated guidance on the Duty to Report which, on page 17, specifies:
‘For construction contracts in scope of the Housing Grants, Construction and Regeneration Act 1996 or the Construction Contracts (Northern Ireland) Order 1996, businesses must use the earliest point at which they have notice of an amount for payment. This would generally be the date they receive an application for payment or, in cases where there is no application for payment, the date on which they receive a payment notice (or default payment notice) or on which they issue a payment notice – whichever is earliest. Day 1 of the time taken to pay will be the day after the day on which the business has this notice.’
While it is disappointing that the government has not taken on board feedback from the industry, it is helpful to have clarity on the measurement of payment performance ahead of the first companies being required to publish their report.
Government web service
Businesses which fall under the scope of the legislation and are required to publish their payment terms and practices via a dedicated government live web service. The website is live so please remember that any data you publish will be visible publicly.