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Reform Late Payment legislation

Comment 9th July 2010

Late payment legislation doesn't work, as suppliers are too frightened of losing business and the sums involved are generally too small to be worth enforcing anyway.

So instead get HM Revenue and Customs to extract the late payment interest as a levy on all invoices paid over 30 days old, to force larger companies to comply.

Why does this matter?

Late payment legislation doesn't work, as suppliers are too frightened of losing business and the sums involved are generally too small to be worth enforcing anyway.

Instead we have smaller companies still providing working capital to larger operations, and going bankrupt because a large supplier lets them down.

Larger companies who flout the law get a competitive advantage over those that comply to the detriment of all.

Additionally the banks much prefer to deal with larger companies, and those organisations can generally get capital at much lower cost than smaller operations.

By enforcing a strict 30 day rule, larger companies would likely obtain more working capital and then trickle that down to smaller operations. The result is much less working capital tied up in the supply chain, and what there is at a much lower cost. Less to banks, more to production and productive jobs.

Ultimately the only entity larger companies are scared of is HM Revenue and Customs. If HMRC enforced late payment interest as a levy then more larger companies would comply with the legislation. If the levy collected remains large, then that can be used to reduce smaller company taxation. However the intention would be to reform behaviour and improve capital flows to smaller businesses.

 

 

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