The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 – Everything businesses need to know
Adflex's business payment experts work with large enterprises and their suppliers
every day. We see first-hand how payment practices impact cash flow, supplier
relationships and a company's bottom line. In this article, Pat Bermingham, CEO of
Adflex, breaks down everything UK businesses need to know about the Companies
(Directors’ Report) (Payment Reporting) Regulations 2025, which is effective as of 1 January 2026.
Late payments cost the UK economy almost £11 billion per year and are responsible
for the closure of 38 businesses every day. This trend is worrying, because it’s
getting worse, not better: 90% of UK companies experienced late payments in the
past year and 44% say delays are more frequent than before.
From the Late Payment of Commercial Debts (Interest) Act (1998), the Prompt
Payment Code (2008), The Procurement Act (2023) to the Fair Payment Code
(2024), the UK government has actively tried to address this growing crisis for the
best part of three decades. But, as the data shows, such attempts have so far failed.
In the government’s latest bid to curb the crisis, new payment reporting rules come
into effect in January 2026, under ’The Companies (Directors’ Report) (Payment
Reporting) Regulations 2025.
What does the regulation say?
From 1 January 2026, select companies (see below for who) across England, Wales,
Northern Ireland and Scotland will be mandated to submit information on their
payment practices, policies and performance in their financial year directors’ reports.
New information that will be required in reports includes:
- Stating standard supplier payment periods (in days) and explaining any changes to those terms, including whether suppliers were notified or consulted.
- Disclosure of how quickly suppliers are paid in practice, including the average time to pay and the percentage and total value of payments made within 30 days, 31–60 days, and 61+ days.
- The percentage and total value of payments that were paid late against agreed terms.
For a full breakdown of exactly what will need to be reported moving forward, see
regulation five of the legislation titled ‘Insertion of Part 9 of Schedule 7’.
While penalties for non-compliance are not outlined in this specific legislation, it will
fall under standard reporting rules. Individuals and companies could be liable on
summary conviction to a fine if they don’t comply or knowingly publish incorrect
information.
Which companies need to comply?
Companies that will be required to comply with this legislation must meet at least two
of the three criteria below on its last two balance sheet dates:
1. £54 million or more annual turnover
2. £27 million or more balance sheet total
3. 250 or more employees
For parent companies or ‘groups’, each subsidiary that meets the above size criteria
must report separately, even if the parent also reports. Companies that have been
incorporated within the last year are exempt from reporting, as companies must have
two years of accounts showing it met the above size criteria to fall into scope.
Note that the legislation comes into effect in January only for companies that report
financial years beginning in January. For those that report from April, the legislation
will come into effect from April.
If you’re unsure whether your company must comply with the legislation, visit the
government’s ‘Duty to report’ guidance page.
What are the aims of the legislation?
To date, the government’s attempts to curb the late payment crisis have failed. Tina
McKenzie, the Financial Stability Board Policy Chair, summarised it succinctly back
in 2023: “The UK is almost unique in being a place where it is acceptable to pay small
businesses late, and that will remain the case without further action.”
The voluntary nature of the Prompt Payment Code and the more recent Fair
Payment Code, mean there are limited repercussions for poor payers. Prompt
payers are rewarded but poor payers continue as normal.
The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 takes a
different approach, introducing a new form of accountability. The aim is that now
when suppliers are choosing where to buy from, they can check director reports to
compare which buyers are most likely to pay on time. Over time, as suppliers
actively avoid working with poor payers, those companies will be forced to enhance
their payment practices to keep existing customers and win new customers.
All this means that there are greater commercial risks associated with poor payment
practices.
Enhancing payment practices
The good news is that businesses affected by the legislation can take proactive
steps today to improve their payment practices to avoid being labelled as a poor
payer.
Unlike the consumer payment world, which has long benefited from streamlined
digital payments, business payments have traditionally been slower, more manual
and prone to delays. But times have changed.
Innovations such as virtual commercial cards and straight-through processing (STP)
are transforming how businesses can pay suppliers. Virtual cards offer a line of
extended working capital, while also enabling automation that can reduce processing
costs and accelerate payment cycles.
STP takes efficiency a step further by flipping the payment process on its head,
enabling the buyer to initiate payments, sending funds directly to the supplier through
a payment platform or automated API integration. This reduces manual intervention,
streamlines cash flow management and strengthens supplier relationships by
offering faster, more predictable payments. By simplifying processes and reducing
administrative overhead, STP not only improves the business payment experience
but also helps businesses reduce compliance exposure, including PCI DSS scope.
It’s time businesses adopted digital payments to make late payments a relic of the
analogue age. When paired with clear reporting requirements under the new
legislation, enhanced business payment processes have the potential to offer
businesses both a competitive edge, differentiating themselves as a prompt payer,
and a stronger reputation as a trusted, reliable partner.
To find out more about how digital business payments can save you time and money, speak to Adflex today..
