CM April 2020

Prompt Payment Code moves to Small
Business Commissioner’s office
THE CICM has confirmed it has
transferred the hosting and
administration of the Prompt
Payment Code to the Small
Business Commissioner’s office in line
with the Government’s stated ambition to
bring all late payment initiatives under a
single umbrella.
Since its launch in 2008, the Code has
played an important part in promoting a
culture of prompt payment, committing
signatories to pay 95 percent of invoices
within 60 days and work towards 30 days
as normal practice. In the last 12 months,
businesses that have failed to honour
those commitments have been removed,
and only re-instated when a suitable
remedial plan has been approved by the
PPC’s Compliance Board.
Sue Chapple FCICM, the CICM’s
interim Chief Executive, says it makes
perfect sense to streamline payment
issues under the Commissioner’s remit.
She says it makes particular sense to
transfer the Code now following the
appointment of the Code’s originator,
Philip King FCICM, to the post of
interim SBC: “Small businesses want a
single body to whom they can turn for
advice,” she says, “and by transferring
responsibility for the Code to the
Commissioner’s office, we can ensure
the Code receives the investment
and resources it needs to continue its
success in transforming the payment
landscape and promoting best practice.”
Plans were first proposed to transfer
the Code in the Government’s 2019
consultation, ‘Creating a responsible
'We will be working with the
Commissioner and trade
bodies including the CICM to
help increase the number of
businesses on the Code.'
Payment Culture’. The Government said
at the time: ‘We want to increase the
number of people signed up to the Code,
where good practice can be recognised
by their customers and suppliers.
Signing up to the Code is voluntary, so we
will be working with the Commissioner
and trade bodies including the CICM to
help increase the number of businesses
on the Code, including targeting those we
know are already meeting the standard
through their PPR data.’
To date there are more than 2,500
signatories to the Code. In the last 12
months, and a change in policy to allow
those who had failed to honour their
Code commitments to be named publicly,
55 businesses have been suspended
and 26 re-instated, the latter having
demonstrated a substantial improvement
in payment performance that warrants
re-instatement.
“This is the Code working at its
best,” Sue continues. “Throwing people
off is the easy part, but what encourages
me, and shows that the Code has real
power, are the actions taken by half
of all those suspended to have their
businesses re-instated. That says to
me that they want to be seen
to be fair to their suppliers, and
they recognise the harm
that can be done to their
brands by failing to
comply.
“A properly
resourced Code with a
clarity of purpose can
make a real difference.”
Philip King FCICM
Credit professionals lose fight
in preferential status row
THE Budget has confirmed plans to
grant HMRC ‘preferential status’ in
insolvencies from December 2020,
leading business groups, including R3
and the CICM, to describe the move as ‘a
threat to business lending and business
rescue.’
From December, debts owed to HMRC
by insolvent businesses will be repaid
in advance of those owed to ‘floating
charge’ lenders, other businesses, and
pension schemes.
Floating charge lending is a key form
of finance for retailers and SMEs and
has been increasingly popular over the
last two decades. Lenders have warned
that the Government’s policy will limit
the availability of this type of finance.
Duncan Swift, R3 President, says the
Government has ignored advice from
across the business landscape that the
policy should be reviewed, or that steps
should be taken to mitigate its impact:
“The return of HMRC’s preferential
status in insolvencies is a badly-timed
and ill-considered blow to the UK’s
enterprise culture. It will damage
business lending and business rescue,
and will affect jobs, livelihoods and the
economy.
“It’s perverse that on the day that
the Bank of England has taken steps to
boost business lending, the Government
has taken a step in the opposite
direction. It is beyond frustrating that
the Budget has confirmed the policy
will be introduced without meaningful
changes from what was first proposed.
The plans were first announced in
2018 with no consultation and, since
then, there has been near unanimous
opposition to them. Business groups
and lenders have been clear that the
policy will be a short-term gain for
HMRC at the expense of a long-term
cost for the economy.”
Duncan says that the slight delay
in implementation until December
changes nothing: “A bad policy in April
is still a bad policy in December,” he
continued. “It is scarcely believable
that the Government has turned a deaf
ear to these concerns and has ignored
sensible suggestions for how the
negative consequences of the policy
could be mitigated. This has been a
policymaking failure from start to
finish. “At a time when businesses
are facing economic headwinds, they
need the Government to help them,
not elbow them out of the way. Priority
repayment for HMRC in insolvencies
will reduce what can get repaid to other
businesses, pension schemes, and
lenders. Reduced returns to lenders
will increase the costs of borrowing
and availability of finance, especially in
rescue situations.
“Ultimately, dropping the policy
entirely would be the only way to
avoid its harmful side effects. The
Government would see much better
results if HMRC were to engage
proactively and commercially in
insolvencies rather than trying to skip
the repayment queue.”
Sue Chapple, interim Chief Executive
of the CICM, is similarly aggrieved:
“Sadly the Government has persisted
with the folly of reintroducing Crown
preference, and the impact on trade
creditors, their revenues and their
cashflow will be substantial. While
it may appear to be a simple way of
growing the Government's tax receipts,
any benefit will be far outweighed by
the damage done to
businesses and the
wider economy
and the proposal
should have been
confined to the
waste paper bin."
Advancing the credit profession / www.cicm.com / April 2020 / PAGE 10