From 1 March 2025, the Reporting on Payment Practices and Performance (Amendment) Regulations 2025 will come into force, bringing new obligations for large UK companies and LLPs operating under qualifying construction contracts.
These latest amendments strengthen the existing payment practices reporting regime, which has been in place since 2017, requiring large businesses to report on their invoice payment performance every six months.
The changes mark another step in the Government’s drive to increase transparency and accountability in construction payment practices.
What’s changing?
Under the new regulations, businesses must now include additional reporting on:
- Retention clauses – Reports must specify how retention payments are managed in qualifying construction contracts with suppliers.
- Expanded reporting scope – Construction contracts are broadly defined, meaning businesses should assess their contractual arrangements carefully to determine if they fall within the updated reporting requirements.
- New financial year application – The updated reporting rules apply to financial years beginning on or after 1 April 2025.
Why does this matter?
The construction sector has long faced issues with late payments and retention disputes, often causing cash flow challenges for subcontractors and smaller suppliers.
By mandating greater transparency, the Government aims to encourage fairer payment practices and reduce delays in the release of retention funds.
This latest amendment builds on previous changes introduced in April 2024, which were the outcome of a Government consultation on payment practices in 2023.
What should businesses do next?
- Review existing reporting processes – Ensure your payment reporting framework includes clear details on retention clauses.
Assess contracts for compliance – Check whether your contracts fall under the broad definition of a “qualifying construction contract”. - Prepare for the new financial year – The changes apply to financial years starting from 1 April 2025, so businesses need to adjust their reporting systems in advance.
The increased scrutiny of payment practices in construction means businesses must take proactive steps to ensure full compliance with the new reporting rules.
For guidance on navigating these changes and ensuring your payment practices remain fully compliant, our Construction Law team is on hand to assist. Get in touch today.