The new reporting requirements are contained in the regulations published by the Department for Business, Energy and Industrial Strategy (BIES) and came into force from 6 April 2017.
In essence, the aim is to promote prompt payment and to increase the level of transparency around payment practices, for example, to identify which companies are good payers and which companies offer suppliers the terms that best fit with their business model.
The requirements apply to charitable companies (including companies limited by both shares and by guarantee) and community interest companies which meet two of the following criteria:
A subsidiary company owned by a charity may also be affected, regardless of whether the parent charity is itself a company.
Unless they own a subsidiary company that meets the criteria set out above, Royal Charter bodies, charitable incorporated organisations (CIO), statutory corporations, registered societies and charity trustees which are incorporated under the Charities Act 2011 are not affected by the new reporting requirements. Charities established by trust or Charity Commission scheme or set up as unincorporated associations are also not affected, unless they own a subsidiary company which meets the above criteria.
Any charity within the scope of the requirements must publish a report on the government website (yet to be developed) in respect of consecutive six month periods which are aligned to begin and end with the charity’s financial year. Reporting must be completed within 30 days of the end of the six month period to which the report relates.
The report must include the following information:
The regulations provide that failure to publish a report or providing false information in a report is a criminal offence and the company and directors will be liable to a fine on summary conviction, although BIES confirms that it will “generally seek to encourage a business to comply with the reporting requirement before steps are taken to prosecute”.
Trustees of affected charities should be aware of the new requirements and should prepare well in advance of the beginning of the first financial year under which they will have to report. It will be easier if trustees are comfortable with their standard terms for payment of suppliers and dispute procedures, and systems are in place ahead of the beginning of the period for which a report is due.