On 19 May 2026, the Government introduced the Commercial Payments Bill to Parliament following its earlier announcement in the King’s Speech. The Bill is designed to tackle persistent late payment and “excessive delays and unfair practices” in supply chains, with a particular focus on strengthening protections for small businesses dealing with larger purchasers.
Although largely a commercial Bill, the Bill may be relevant for employers where contracts are entered into with small businesses for the provision of services, for example self-employed contractors working through personal service companies, particularly where they contract on the employer’s standard terms.
Key Provisions
Employers that rely on these arrangements should be aware of the following key provisions in the Bill:
- A statutory cap on payment terms – The Bill will introduce a maximum payment period of 60 days in commercial contracts within scope (broadly, business-to-business contracts for the supply of goods and services), subject to limited exemptions
- Mandatory statutory interest on late payments – The Bill makes statutory interest an implied term of in-scope contracts at 8% above the Bank of England base rate and will void contractual terms that exclude or vary that right
- A tighter regime for late invoice disputes – The Bill introduces a new implied term into contracts that suppliers can recover a fixed sum from purchasers in cases where a dispute is raised late or without providing sufficient information by the deadline
- Expanded Small Business Commissioner powers – The Bill expands the Small Business Commissioner’s powers, including a new statutory adjudication scheme for payment disputes, stronger investigatory powers and enforcement powers including to impose financial penalties of up to 1% of annual UK turnover for certain breaches
Next Steps
The Bill is still progressing through Parliament and secondary legislation is expected before the key provisions are expected to come into force. Accordingly, it is not anticipated to come into force until 2027 and the provisions may be subject to change during the Parliamentary process. Most of the Bill applies to England and Wales, Scotland and Northern Ireland (with some exceptions).
In preparation, employers may wish to start thinking about how the Bill’s provisions will impact them, including:
- Reviewing their standard payment terms within consultancy agreements to determine if they are in scope of the new rules, whether any exemptions apply and if so, whether existing terms will be compliant with the new 60-day cap and the Bill’s ‘trigger date’ rules
- Understanding how they manage invoices in practice (such as internal sign-off, timesheet approval, delivery milestones or receipt of supporting documents) to see if any improvements can be made to ensure concerns about deliverables are identified early and documented properly in preparation for the new rules for raising disputes
- Assessing any potential future exposure to mandatory statutory interest
