The proposed UK Commercial Payments Bill: what it could mean for your business

• Company Commercial

In May 2026, the government proposed a new Commercial Payments Bill aimed at improving payment practices across UK supply chains. In July 2026 the Bill completed its committee stage in the House of Lords and now continues its passage through Parliament.

What does the Commercial Payments Bill hope to achieve?

Whilst we await the fine print of the Bill, the direction of travel is clear: faster, fairer and more transparent payment. A key focus of the Bill appears to be where there is a power imbalance between the negotiation strength of parties, particularly smaller suppliers dealing with larger organisations.

Typically, in this circumstance it would be expected that the small supplier would have to take the risk of a slower paying larger organisation which can have serious consequences for small businesses.

Late payment is a persistent commercial risk: it strains cashflow, increases financing costs, and is a leading cause of insolvency. A strengthened regime is likely to increase both scrutiny and consequences (commercially and reputationally) for businesses with poor payment performance.

When is it expected to be in effect?

It is anticipated that the Bill will come into effect at some point in 2027, however businesses are urged to understand and prepare for the expected changes now.

The proposed new rules

Although the details within the Commercial Payments Bill have not yet been finalised, businesses should expect changes in the following areas.

1. Payment terms and when the clock starts

There is likely to be pressure on unfairly long payment periods and on contractual mechanisms that defer invoice acceptance, such as unclear approval steps or open-ended acceptance milestones. Clear, workable triggers for invoicing and payment will become more important.

The legislation is currently proposing to introduce the following.

• A statutory maximum of 60 days for business-to-business payments.
• A statutory maximum of 30 days for certain public authority purchasers where the Procurement Act 2023 does not apply.
• Mandated trigger dates from which the payment clock runs, requiring clear rules in contracts and operational alignment between purchase orders, delivery or acceptance milestones, and invoicing.
• Mandatory statutory interest at 8% above the Bank of England base rate for late payments.

Exemptions

Certain contracts may be exempt where the purchaser is the smaller party, or both parties are large undertakings, or the contract type is specified by regulations, provided that neither party is a public authority and the exemption is in writing and expressly specifies the exemption.

2. Greater transparency

Within the Commercial Payments Bill, payment reporting, particularly for larger organisations, may become more detailed and more accessible to suppliers, customers and stakeholders.

The reputational risk for non-compliance may become much more substantial and makes accurate internal data and audit trails essential. Boards and audit committees are expected to provide explanations and improvement plans where performance falls short.

3. Stronger enforcement: an enhanced Small Business Commissioner

Policy signals suggest tougher consequences for persistent late payment and for inaccurate reporting, potentially including penalties and public scrutiny. Payment performance may increasingly be treated as a governance matter, not just an operational one.

The Commercial Payments Bill proposes the following powers:

• A new mandatory adjudication scheme for payment disputes between smaller and larger businesses. Only small businesses may refer disputes. Any contracting out by larger businesses would be void.
• New investigation powers into persistent poor payment practices.
• New enforcement powers, including recommendations, publication requirements, directions and financial penalties up to 1% of annual UK turnover, with proportionality and appeal safeguards.

4. Faster dispute handling

There may be greater emphasis on raising invoice disputes promptly, paying undisputed sums on time and using efficient escalation routes to avoid disputes becoming a de facto payment delay tactic.

How the Commercial Payments Bill could impact supply agreements and commercial contracting

If your templates or negotiated positions rely on extended terms, complex acceptance mechanics or broad set-off rights, it is advised that you revisit the following.

• Payment clauses: term length, payment triggers, invoice validity requirements and whether conditions precedents are genuinely necessary.
• Dispute provisions: tight timeframes for raising disputes, clear escalation and an obligation to pay undisputed amounts.
• Interest and costs: ensure late-payment interest is operable in practice rather than theoretical.
• Set-off and deductions: ensure deductions are transparent, evidenced and not used to delay payment.
• Suspension or termination: proportionate remedies for persistent non-payment, with clear notice and cure periods.
• Flow-down terms: where contracting through tiers, ensure upstream and downstream payment obligations align.

How can GA Solicitors help?

At GA Solicitors in Plymouth, we advise all types of businesses on payment risk and supply-chain contracting, including reviewing and updating supply and procurement templates, aligning payment, dispute and set-off clauses with evolving expectations, designing practical invoicing, acceptance and dispute workflows that reduce delay and friction, and supporting negotiations where counterparties push extended terms.

Our experienced company commercial solicitors can offer a high-level review of your standard terms and payment processes in light of the proposed Commercial Payments Bill, ensuring you are compliant.

Ranked in The Legal 500 and Chambers UK you can be assured you are in the best possible hands. Call the team today on 01752 203500 or email enquiries@GAsolicitors.com.

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