The Government has decided to extend the 15-day prompt payment rule beyond central Departments to the wider public sector to assist cash flow within the SME sector. The Department of Enterprise, Trade and Innovation is currently working on the arrangements for extension of the 15-day prompt payment rule. This includes reporting requirements for public sector bodies and my officials will consult other Departments on the matter shortly.
The 15-day prompt payment rule was introduced to Departments on an administrative basis and the extension to the wider public sector will be implemented in a similar manner. The existing legal situation will apply, whereby public sector bodies are subject to the European Communities (Late Payment in Commercial Transactions) Regulations 2002, SI 388 of 2002. Under these regulations, it is an implied term of every commercial transaction that where a purchaser does not pay for goods or services by the relevant payment date, the supplier shall be entitled to interest, that is, late payment interest, on the amount outstanding. In the absence of any agreed payment date between the parties, that is, specified in the contract, late payment interest falls due after 30 days has elapsed, provided the invoice is not subject to query. Interest applies until such time as payment is made by the purchaser.
Any question of late payment penalty interest will only arise in the context of delayed payments beyond 30 days. Accordingly, no penalty interest will apply in cases where payments are made outside the 15-day administrative period but within the 30-day period. All Departments and public sector bodies will be required to continue providing details of late payment interest paid after 30 days in their respective annual reports. Departments currently report on the processing of payments on a quarterly basis and I expect these arrangements will also be extended to public sector bodies. It is my intention that the 15-day prompt payment rule will be extended to as many public bodies as possible.
