New reporting requirements on suppliers’ payment practices and performance

The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 (published on 5 November 2025) (the “Regulations”) introduce new requirements on large companies to make statements within the directors’ reports concerning their payment practices and performance.

What are the new reporting requirements?

The Regulations, which apply across the United Kingdom, amend the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 by requiring the following disclosures, to the extent they relate to “qualifying contracts”, to be included within the directors’ reports of large companies (being ones that satisfy at least two of the following criteria: turnover of more than £54 million; balance sheet total of more than £27 million; and over 250 employees):

• the number of days in which the company is contractually required to pay sums due to suppliers under their standard payment terms
• where the company has varied any standard payment terms during the financial year, details of the variation and of any notification or consultation conducted with suppliers
• the average number of days taken to make payments, calculated from the day on which the company receives an invoice or other notice of the amount due (the “relevant day”)
• the percentage of payments made during the following periods, in each case commencing on the relevant day: the first to the 30^th day; the 31^st to the 60^th day; and on or after the 61^st day
• the percentage and sum total of payments that were not made during the period in which the company was contractually required to pay them.  

Under the Regulations, “qualifying contracts”, are, in broad terms, contracts (other than contracts for financial services) that are subject (i)  to the laws of any part of the UK, or (ii) to the laws of any other jurisdiction (under the terms agreed between the parties to the contract) where, in the absence of that agreement between the parties, the applicable law would be of any part of the UK, and there is no significant connection with any other country outside the UK.

When do they come into force? 

The Regulations come into force on 1 January 2026 in respect of financial years beginning on or after that date.

Are there any exemptions?

Certain exemptions from the disclosure requirements apply, including (i) where the directors’ report is issued in respect of the company’s first financial year or a subsequent financial year in relation to which the company qualifies as ‘medium-sized’; and (ii) in relation to subsidiaries of the company in certain circumstances. 

What is the expected impact?

Whilst the explanatory memorandum to the Regulations acknowledges that these new reporting requirements will result in additional (albeit small)  burdens and costs for large businesses, it considers that this is justified on the basis that it will encourage better payment practices, expose poor payment performance and allow suppliers to check the payment record of potential customers before agreeing to enter into contracts. This is expected to reduce payment times and ultimately benefit businesses by reducing the costs incurred due to late payments, such as in connection with raising external finance to cover cash flow shortages or with diverting administrative time to chase late payments. 

Next steps

Boards of directors of large companies should ensure that their operations embed appropriate systems and controls to enable accurate and fulsome reporting in compliance with the Regulations.

CMS can help you understand and prepare for implementation of the Regulations. Please get in touch with one of the key contacts named below or your usual CMS contact if you would like further information.