Retentions reporting: government publishes details of rule change

The government has released details of the likely information that large contractors will have to publish about their retentions.

Business secretary Kemi Badenoch announced in October that major construction companies will be forced to report key details about the retentions they hold as part of a crackdown on poor payment practices.

Now a newly published impact assessment on the reforms suggests that the rules “will capture a range of information” including:

  • Contractors’ retention policies, including any standard terms they apply to these, as well as their approach to releasing retention money to suppliers.
  • The average number of days taken to make retention payments, after practical completion and the end of the contractual-defects-liability period.
  • The percentage of retention payments paid in 30 days or fewer, between 31 and 60 days, and in 61 days or longer.
  • The percentage of retention payments due that were not paid within the agreed payment period.
  • The average value of retentions held per construction contract, as a percentage of contract value.

The document adds: “These additional requirements will provide greater transparency and public scrutiny of large businesses’ retention-payment practices and performance, as well as improve information to suppliers in the construction supply chain.”

A separate just-published government response to a consultation on payment-practice reporting states that Whitehall will work with the industry to explore the final form that statistical reporting on retentions will take.

This will balance “the value of this information for businesses in the supply chain, as well as the cost and administrative challenges of obtaining and reporting on this information”, it says.

The duty to report retentions will affect those firms required to report their payment data under the Reporting on Payment Practices and Performance Regulations 2017.

Those reporting rules are set to be tightened to require firms to highlight the value of invoices not paid under agreed terms and on disputes.

A review currently being carried out by the Financial Reporting Council could also see further changes introduced that mean businesses must include their payment-performance reporting in their annual reports.

Last week chancellor Jeremy Hunt also announced that Whitehall procurement rules would be tightened to “end the scourge of late payments”.

From April 2024, those bidding for government contracts worth more than £5m will need to demonstrate they pay their invoices within an average of 55 days, or face being barred from jobs.

The following year the average time will be shortened to 45 days, with a 30-day period to be introduced in future.

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