New directors report disclosure requirement on vendor payment data
New directors report disclosure requirement on vendor payment data
For accounting periods beginning on or after 1 January 2026, large UK companies will be required to provide enhanced transparency on their supplier payment performance within the directors’ report.
These amendments arise from The Companies (Directors’ Report) (Payment Reporting) Regulations 2025. Since 2017, large companies have had a duty to report, twice a year, specific data in relation to supplier payment practices, policies and performance via a government portal. The new regulations represent the first time that elements of the Government’s payment practices reporting regime must be incorporated directly into the annual report.
While the government is still planning to reduce the burden on companies through streamlining corporate reporting requirements as part of their planned Regulating for Growth Bill, they have also confirmed that they intend to introduce legislation to tackle late payments for small businesses. The government has therefore stated that the objective of these amendments is to improve transparency and provide clearer visibility for stakeholders over an entity’s payment performance. As these disclosures will be in the directors’ report, auditors will also have certain limited review responsibilities; the audit report must state whether the directors’ report is consistent with the audited accounts and also confirm whether the auditor has identified any material misstatements in the directors’ report.
Which companies are in-scope of these disclosures?
The new regulations apply to UK companies that meet the size thresholds for large companies as detailed below, subject to the two-year rule:
| Exceeds 2 or more of: | Individual company | Group (where the company is a parent company) |
|---|---|---|
| Turnover | £54m | £54m net (or £64m gross) |
| Balance sheet total | £27m | £27m net (or £32m gross) |
| Number of employees | 250 | 250 |
Companies do not need to provide these disclosures in their first financial year.
Where a parent company prepares a group directors’ report, they may exclude information which relate to a subsidiary undertaking that is not in-scope of these disclosures (i.e. information relating to subsidiaries which are in their first financial year or which qualify as small or medium-sized).
Large subsidiaries do not need to provide disclosures in their own directors’ report where they are included in a group directors’ report.
What are the new disclosure requirements?
The new disclosures cover three areas in respect of payments made by the company to its suppliers:
1. A narrative description of the company’s standard payment terms and any changes made during the period. The statement must include the standard contractual length of time for payment of invoices to suppliers. Where changes have been made during the period, the statement must also explain how suppliers were consulted or notified of the changes.
2. Quantitative information on payments made under qualifying contracts during the reporting period:
- the average number of days taken to pay
- the percentage of invoices paid:
- within 1–30 days
- within 31–60 days
- on or after day 61
- the total value of payments made within each of the above time bands.
3. Quantitative information on payments under qualifying contracts which fell due within the reporting period:
- the percentage of payments which were not paid within the agreed payment period, and
- the total value of those late payments
Additional guidance
The DBT have issued detailed guidance on these requirements including examples of calculations for the quantitative disclosures and a definition of a ‘qualifying contract’ and considerations when supply chain finance is used - Guidance to reporting on payment data in directors' reports.