Improving payment practices

The UK Government has launched a consultation to gather views on a package of proposed legislative measures to improve payment practices and support small businesses.

Key proposals:

• Large organisations (i.e. those that meet 2 or more of the following criteria: (1) turnover of £54m or above; (2) a balance sheet of £27m or above; and/or (3) staff of 250 and above), will need to publicly disclose their payment practices, including the average time taken to pay suppliers and the percentage of invoices paid late. The thresholds under the Reporting on Payment Regulations 2024 (as reported in our January Horizon Scanning) have increased so that they align with the Companies Act 2006 definition of a medium sized business.

• New rules will seek to reduce payment terms in order that suppliers are paid within 60 days subject to further consultation and a transition period. The aim is to give small businesses greater certainty and faster access to cash, addressing the chronic issue of delayed payments from larger firms. Under the current legislation, businesses can agree a period longer than 60 days for payment but it must be fair to both businesses. It is proposed that this extension be removed.

• The statutory default interest rate (currently 8%) is proposed to become mandatory, removing the ability for parties to negotiate a lower default payment rate.

• The Small Business Commissioner is proposed to be given powers to investigate complaints of late payments and enforce compliance with new regulations.

• New financial penalties on persistently late payments, based on unpaid statutory interest.

• Businesses failing to raise a dispute within 30 days of receiving an invoice will have to pay the full amount within the agreed terms, and any late payments will incur statutory interest.

How could it impact your business?

In preparation for the changes, businesses should monitor their payment practices to determine how long invoices remain unpaid and the reasons behind this operationally – for instance, is there sufficient resource and/or technology to ensure bills are paid on time. What will the impact be on cashflow?

In terms of contract management, contract teams will need to be aware of any statutory mandatory default interest rate, payment dates and dispute resolution deadlines in accordance with new time limits for raising and resolving invoice disputes. Training may be required and amendments made to standard terms. Complaints policies may also need to be reviewed.

It remains to be seen if businesses will face restrictions on specific practices, one possible measure is to introduce a restriction on retention clauses in construction contracts.

What steps should you take?

Businesses should stay up to date with upcoming changes and invest in the resource to ensure they can comply with the late payment legislation that is introduced. Internal teams should assess current payment practices and prepare for potential legislative changes.

Stakeholders are encouraged to respond to the consultation, which is now open until 23 October 2025. The proposed implementation window is between 2026 and 2027 but changes may be implemented from as early as January 2026.

Changes to company registers and identity verification

From 18 November 2025, the reforms introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA) will come into effect, changing how companies in the UK handle their records and engage with Companies House. The two key changes are:

1. Centralised registers

Companies will no longer need to keep their own physical registers for directors, secretaries, and people with significant control (PSCs). Instead, this information will be reported directly to Companies House, which will maintain a central database. This will be mandatory and companies will no longer be able to opt in or out of this service.

2. Mandatory identity verification

As stated in our January Horizon Scanning update, all directors and PSCs will be required to verify their identity with Companies House. This is a mandatory requirement for both new and existing personnel. It effects new directors and PSC’s when they are appointed at Companies House and it will affect existing personnel if there is a change in their details or status. A 12-month transition plan for all existing directors and PSCs to verify their identity will also begin on that date.

New directors will be required to provide their Companies House personal code when registering a new company or being appointed to an existing company. New PSCs will be required to provide their personal code within 14 days of being added to the Companies House register.

Existing directors will be required to provide their Companies House personal code as part of their company's next confirmation statement filing. Individuals with more than one directorship will be required to do this for each company of which they are a director. Existing PSCs, who are also directors of the same company, must provide their personal code as a director as part of the relevant company's confirmation statement filing and must provide this within 14 days of the relevant company's confirmation statement date. Companies House have said this will be done via a service which will be made available when the requirement comes into force.

Identity verification requirements for people who file at Companies House, corporate directors of companies, corporate members of LLPs and officers of corporate PSCs will be introduced at a later date.

How could it impact your business?

These changes will impact a company's administrative and compliance processes. The responsibility for maintaining statutory records will shift from the company to Companies House, meaning that companies will need to update their internal procedures for filing company information and keeping records.

As indicated above, the introduction of mandatory identity verification means new directors and PSCs will need to be verified with Companies House and obtain their personal code before they can be appointed. For existing personnel, this new requirement will need to be factored into the company’s annual filing cycle. Businesses should also be aware that there may be penalties for non-compliance, therefore it is important to ensure all relevant individuals are verified and their personal codes are accurately filed.

What steps should you take?

Companies will need to register information in relation to the directors, secretaries and PSCs with Companies House and keep this up to date. Companies will still have to hold a register of shareholders (members) either at the company’s registered office address or single alternative inspection location.

To prepare for the changes coming on 18 November 2025, all directors and PSCs within a company should be identified and encouraged to verify their identity with Companies House ahead of the implementation date in November. Individuals can verify their identity with Companies House through GOV.UK One Login or through an authorised corporate service provider (ACSP). An ACSP is an authorised provider who is able to act as an intermediary between clients and Companies House for tasks like identity verification and company filings. Examples of ACSPs include accountants, solicitors, and company formation agents.

As identity verification is becoming mandatory, failure to act may result in penalties and could put the company in non-compliance with the new regulations, which could lead to legal and financial consequences.

Online Safety Act – the data points

The Online Safety Act 2023 (OSA) received royal assent in October 2023, but certain requirements have only recently come into force on 25 July 2025 – specifically, provisions relating to child safety and the legal duty to protect children online, including the requirement to implement age-verification measures for certain content.

The OSA does not directly amend data protection legislation, but compliance with its new measures will likely generate additional privacy implications and risk. While the OSA marks a significant step in protecting children online, clearly there is a responsibility on platforms to handle personal data ethically and securely. Age verification must not become a gateway to excessive surveillance or identity tracking. Instead, it should be implemented with privacy-by-design principles, ensuring that safety and data protection go hand in hand.

How could it impact your business?

Under the OSA, platforms must implement “highly effective” age assurance methods to prevent children from accessing harmful or age-inappropriate content. Whilst the OSA is largely focused on protecting children from pornographic, self-harm or eating disorder content, the OSA is much further reaching; websites, apps and other services that allow users to post content or interact with each other are also within its scope. The new requirements will therefore impact businesses operating any such service or platform.

For businesses within scope, age assurance methods could include facial age estimation using AI, photo-ID matching, open banking and mobile network operator age checks. Crucially, self-declaration and basic online payment methods are no longer considered sufficient methods to verify the user’s age.

What steps should you take?

The use of verification methods may involve processing sensitive personal data, including biometric information and official identity documents. Accordingly, when introducing such methods it will be fundamentally important that the platform takes specific (in some cases additional) steps to ensure compliance with UK data protection legislation. This may involve conducting a Data Protection Impact Assessment to risk-assess and mitigate the privacy impact of the new processing activity, and updating privacy information to satisfy transparency obligations.

There is also an increased risk of data breaches, as the collection and storage of sensitive data increases the threat of a cyber-attack – facial recognition and ID scans are high-value targets for malicious actors. To reduce this risk, minimal personal data should be collected for age verification purposes – indeed, the Government has confirmed in a press release that “The measures platforms have to put in place must confirm your age without collecting or storing personal data, unless absolutely necessary”.

These requirements are now in force, so businesses falling within the scope of these rules should be reviewing their online services and implementing appropriate measures urgently if they have not already done so. Ofcom is responsible for enforcing the OSA and can impose fines or block non-compliant services. The Information Commissioner’s Office oversees data protection compliance and may investigate and take regulatory action in relation to breaches or misuse of personal data.

Ban on the use of NDAs to cover up sexual misconduct, bullying and harassment in Higher Education

On 1 August 2025, section 1 of the Higher Education (Freedom of Speech) Act 2023 (the Act) was brought into force. Section 1 of the Act is aimed at ensuring freedom of speech for staff and students of universities. It includes a ban on using Non-Disclosure Agreements (NDAs) which limit disclosure of information in relation to sexual harassment, sexual misconduct or allegations of bullying and harassment. This prohibition is not just for NDAs entered into with members of staff, but also includes students, members and visiting speakers/lecturers.

How could it impact your business?

Even if you are not a higher education provider, you should be aware of the wider trend. As mentioned in our July horizon scanning update, similar provision is planned for all employment relationships from next year. The draft Employment Rights Bill (ERB), which will be introduced in 2026, currently contains similar provision limiting the use of NDAs which limit or prevent disclosures about harassment, bullying and discrimination (except where they are included in “excepted agreements”). These “excepted agreements” are not yet defined but it is expected that they will be agreements entered into at the request of the employee.

What steps should you take?

If you are a higher education provider you should undertake a thorough review of your precedent NDAs to ensure they do not include any provision which is drafted to limit or prohibit disclosures relating to sexual abuse, harassment, misconduct or other bullying. Instead, best practice would be to have robust whistleblowing, disciplinary and grievance procedures which outline the process for notifying the university of an instance of harassment or bullying, and how it will be dealt with. You should ensure that workplace training addresses how employees and students can report issues in confidence and ensure they are dealt with appropriately.

When is travel time treated as time work?

Taylors Services Ltd (TSL) supplied workers to the poultry industry. This work took place under zero-hour contracts at locations all over the UK, with TSL providing a minibus which would pick up the workers from their homes and transport them directly to their assignments. Sometimes, workers travelled up to eight hours per day and were paid at a flat rate of £2.50 per hour for each hour travelled. In 2020, HMRC issued a notice of underpayment of the National Minimum Wage (NMW). They considered the travelling time to be payable at the NMW. TSL challenged this decision and recently the case came before the Court of Appeal (CoA).

The CoA was clear that the NMW Regulations (Regulations) needed to read as a whole. The Court was in agreement with the Employment Appeal Tribunal who had held that the Regulations made a clear distinction between ‘work’ and ‘travel’, meaning that time spent travelling would not be time work unless it was to be “treated as” time work.

The CoA found that the Regulations make clear that where a worker is travelling at a time they would otherwise be working, that travel is then “treated as” time work for NMW purposes. The only exception to this rule is where the worker is travelling between their home and their place of work or a place where an assignment is to be carried out.

Applying these principles, the Court found that the NMW was not payable to the workers for their travel time. The Court found this time not to be consistent with time work as they could not perform their roles whilst travelling. Additionally, as the workers were being picked up from their home and taken to their assignment this fell in a narrow exception which meant the employer did not need to remunerate the workers for this time.

How could it impact your business?

For employers, this is a useful example of how the provision of transport, specifically collecting workers from their homes and transporting them to a place of work or assignment, means they don’t need to be paid for that travel time.

However, this is a rare exclusion to the general rule that time at the employer’s disposal will be paid at NMW rates. Employers need to be aware when travel is considered time work and is to be paid accordingly. The Tribunal will take a holistic view of the Regulations and should assess the situation in front of them with reference to the entirety of the legislation. The principle of this case will not apply to general work travel during the working day.

What steps should you take?

You should structure the travel arrangements of your workers carefully. If you have workers who are required to work in different locations and you provide transport for them, be careful on relying on this case as a basis for not paying your workers whilst they travel, unless you have done a thorough review to ensure the travel arrangements fit within the narrow limitation this case relies upon. Additionally, if employers require workers to travel long distance and don’t remunerate workers for the time spent, you may find that individuals are less likely to accept roles in the first place.

Government launches parental leave and pay review

The Government has launched a comprehensive review of the parental leave and pay system. This review is expected to last 18 months, following which it is expected the Government will produce a report of key findings and a roadmap for potential change. The objectives of the review are:

1. Mental Health - improve and support mental health of new parents by ensuring that they take sufficient time away from work with an increased level of pay.

2. Economic growth - support economic growth by ensuring new parents are supported and enabled to return to work and advance their careers after having children.

3. Best start in life - provide babies with the best start in life but ensuring sufficient resources and time away from work for new parents.

4. Childcare - offer enhanced support for new parents to make childcare choices which are more balanced and tailored to their family life.

How could it impact your business?

Along with the radical changes contained in the Employment Rights Bill, this review could be another significant change in the employment landscape. New parents may receive enhancements to their parental leave entitlements which may come at additional cost to employers and additional time away from work for employees. That being said, the earliest we are likely to see any changes as a result of this review is 2027, so employers will undoubtedly be focussed initially on the implementation of the ERB which will (in reality) begin to affect individual employment rights from April 2026.

The report follows on from one which concluded in June 2025, which was completed by the Women and Equalities Select Committee. Their report provided the following recommendations:

1. A day one right to paternity leave (this will be delivered by the ERB)

2. Incentivise greater gender equality in parenting responsibilities

3. Increase statutory paternity leave to six weeks (from two weeks at present)

4. Simplifying shared parental leave

What steps should you take?

As explained above, this review is in its very early stages, and we are unlikely to see any changes until 2027 at the earliest.

In the meantime, employers should take time to ensure they understand the obligations that they currently have as to parental leave and the changes which will be brought in in the nearer term with the introduction of the ERB. This includes paternity and parental leave becoming ‘day one’ rights, enhanced dismissal protection for pregnant women and new mothers, and strengthened rights to request flexible working.

Government launches “WorkWell” pilot scheme to support workers with health conditions back into work

The Department for Work and Pensions and the Department of Health and Social Care have launched a new pilot “WorkWell” scheme. The scheme is designed to help people back into employment who are absent with health conditions. The scheme will be run across 15 districts in England.

The pilot will see people who would ordinarily be given Fit Notes (which certifies they are unfit to work) connected with a local support network who will provide health and employment advice. Through this service, individuals will be offered a range of interventions including career coaching and gym memberships, and occupational therapists and physiotherapists will be upskilled to be able to issue fit notes. The hope is this will reduce the pressure on the NHS and help 56,000 people back into work by spring 2026.

Employers should be aware of the importance of obtaining occupational health reports in respect of an employee or prospective employee. This is relevant where you need to assess health or physical ability as a relevant factor for the role being offered or as a pre-requisite for membership of employee benefits programmes, for example health insurance, or to consider whether an employee is suffering from a physical or mental impairment which will require additional support.

California climate disclosure laws survive legal challenge

A federal judge in California has denied a motion for preliminary injunction against Senate Bills SB 253 and SB 261. These laws mandate climate-related disclosures for companies operating in California. SB 253 targets Scope 1 and 2 emissions, while SB 261 focuses on climate-related financial risk. The decision allows enforcement to proceed while litigation continues, with initial reporting starting in 2026 for some companies. Full enforcement and definitive regulations are still being finalised.

How could it impact your business?

California businesses will need to assess and report their emissions and climate-related financial risks, which may require updates to ESG policies, data collection processes, and reporting frameworks. While penalties are not yet finalised, non-compliance could still lead to reputational damage and regulatory scrutiny. Although these laws impact businesses operating in California, the increased reporting requirements could have a knock-on impact for any companies trading with California-based businesses (including those within the UK).

Given California’s economic weight, these laws may also set a precedent for other US States’ standards, even with a hostile White House.

What steps should you take?

Any UK companies trading with California, and the wider US, should check with their trading partners if they will be raising climate due diligence enquiries over the coming years. Preparations to respond to such enquiries should be aligned with any reporting due under current UK legislation and with incoming EU requirements.

FCA reports maturity in Sustainability-Linked Loan market

In August 2025, the UK’s Financial Conduct Authority (FCA) reported that the Sustainability-Linked Loan (SLL) market has matured significantly since its 2023 review. Improvements include more ambitious KPIs, better alignment with borrowers’ business models and stronger enforcement.

However, challenges remain, such as limited pricing incentives and barriers to SME participation. The FCA’s update signals a shift toward higher standards and increased scrutiny in SLL structuring.

How could it impact your business?

Borrowers can expect tighter scrutiny and more rigorous sustainability requirements in SLLs. Legal teams will need to ensure KPIs are material and defensible, as weak terms may pose reputational risks. Banks are increasingly willing to declassify loans that fail to meet sustainability criteria, raising the stakes for compliance. SMEs may struggle to access SLLs due to high reporting costs and large minimum loan sizes, potentially requiring alternative financing options.

What steps should you take?

Businesses considering SLLs should review their sustainability metrics and ensure they are robust and aligned with core operations. Legal advisors should be proactive in structuring credible KPIs and SPTs to avoid greenwashing concerns.

SMEs may need to explore other transition finance tools or seek support to meet SLL requirements. Delaying action could result in missed funding opportunities or reputational damage.

Collapse of global plastic treaty negotiations

Negotiations to establish a legally binding global treaty on plastic pollution collapsed in Geneva this August, after six rounds of talks over three years. Despite participation from 185 countries, disagreements over plastic production caps and chemical controls prevented consensus. The breakdown leaves the treaty process in limbo, with timelines now uncertain and regional regulatory responses likely to accelerate.

How could it impact your business?

The collapse of treaty negotiations introduces legal and commercial uncertainty, especially for companies with global supply chains. Regulatory fragmentation is expected, with regions like the EU and Latin America likely to pursue stricter plastic controls independently. Businesses may face varying compliance requirements, increased reputational risks, and pressure to adapt packaging and materials strategies. The lack of a unified framework complicates long-term planning and sustainability commitments.

What steps should you take?

Companies should closely monitor regional legislative developments and prepare for divergent plastic regulations. Updating supply chain risk assessments and engaging with sustainability and legal teams will be key to navigating emerging compliance burdens.

SMEs and multinationals alike should consider proactive measures to reduce plastic use and explore alternative materials. Waiting for global consensus may result in missed opportunities or exposure to fast-moving national restrictions.

Ellis v John Benson Ltd

The High Court’s decision in Ellis v John Benson Ltd [2025] has reaffirmed that franchise agreements may include implied duties of good faith, particularly where franchisees are vulnerable and franchisors exert significant control.

The judgment builds on earlier cases like Dwyer v Fredbar, signalling a shift toward greater judicial scrutiny of franchisor conduct and contract fairness. Rather than applying a blanket rule, the court favoured a case-by-case approach, implying terms only where necessary to ensure business efficacy. This evolving stance highlights the importance of ethical franchising practices and transparency in contractual relationships.

How could it impact your business?

This ruling could significantly affect franchisors by increasing the legal and reputational risks associated with unfair or overly rigid franchise agreements. If your contracts lack transparency, restrict franchisee autonomy, or fail to encourage independent legal advice, they may be vulnerable to challenge.

Courts may now be more willing to imply duties of good faith, trust, and fair dealing, especially where franchisees are inexperienced or disadvantaged. This could lead to agreements being discharged, damages awarded, or costly litigation. Additionally, aggressive or arbitrary conduct (such as excessive control over pricing, marketing, or communication) may be seen as breaching implied duties.

This case also underscores the importance of ethical onboarding, clear exit strategies, and fair treatment throughout the franchise relationship. Businesses that fail to adapt may face increased scrutiny and risk losing franchisee trust, damaging long-term sustainability.

What steps should you take?

To mitigate risk and align with evolving legal expectations, franchisors should review and revise franchise agreements to ensure fairness, clarity, and ethical standards. Contracts should be ethical, easy to understand, and include mechanisms for franchisees to exit or sell their business. It’s essential to encourage and document independent legal advice, especially where personal guarantees are involved. Onboarding processes should be transparent and supportive, particularly for franchisees with limited experience. Avoid conduct that could be perceived as intimidatory, discriminatory, or arbitrary, and ensure decision-making is consistent and commercially reasonable. Align your practices with the British Franchise Association (BFA) Code of Ethics, promoting mutual trust and confidence. Regularly engage with your network to understand franchisee concerns and maintain a collaborative relationship. These steps not only reduce legal exposure but also strengthen your brand reputation and foster long-term franchise success.

Consultation results - Competitive Captive Insurance Framework

In July, the Government published its response to the consultation launched in November 2024 on a new captive insurance framework. Within the response, the Government set out proposals for a new approach to Regulation of captive insurance companies within the UK with the aim of achieving the following objectives:

• Support growth and international competitiveness of the UK insurance sector;

• Strengthen the sector’s contribution to the UK economy; and

• Enhance the UK’s position as a leading global insurance hub.

The aim is to repeal assimilated EU law under the Financial Services Markets Act 2023 and replace it with regulator-set rules, guided by Government and Parliament - notably as supported by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).

How could it impact your business?

The new framework will enable businesses to consider domiciling their captive insurance companies within the United Kingdom as an attractive position to rival current overseas domiciles. It is expected that this approach will boost the UK insurance market growth and strengthen the economy in offering efficient risk solutions.

What steps should you take?

Businesses with existing captive insurance, or those considering a captive insurance arrangement, should monitor progress as more details are provided by the Government. The schedule for rules and polices is anticipated by Summer 2026 with implementation of the schedule by mid-2027.

Product Regulation and Metrology Act 2025 – changes to the product liability landscape

The Product Regulation and Metrology Bill (the Act) received Royal Assent at the end of July 2025, providing a new framework for product safety in respect of the marketing and use of products in the UK.

The Act takes immediate effect, but it will require secondary legislation to be developed over time in order to give effect to the intentions to modernise and consolidate existing product liability laws and improved consumer protection.

How could it impact your business?

The secondary legislation has not yet been drafted, but it appears that enforcement powers (to be prescribed by the Secretary of State) will be broader and used to promote greater consumer protection through improved product safety, accuracy and consistency.

The Act applies to most products (defined as a tangible item that results from a method of production) and includes packaging, labelling and anything which impacts the character of an item. Food, medicinal and aircraft products and parts are amongst the exclusions - these are already subject to their own specific regulations.

Software is not excluded, thereby ensuring that products such as e-bikes, batteries, autonomous vehicles and smart meters will not escape consumer protection laws and penalties. It appears that the Act is designed with the digitisation of business and new technologies in mind.

What steps should you take?

At this stage, all businesses that manufacture, import or distribute products, plus those carrying out installations, monitoring and certification should be aware of the new legislation. It is anticipated that, once published, the secondary legislation will contain specific requirements for businesses to meet in terms of product safety, marketing and technical specifications.

Online marketplaces are a key area that the legislation applies to. They receive specific mention in the Act. Those that control access to, or the contents of, and/or are intermediaries for online marketplaces could be caught by the regulations once published.

The objectives of the Act appear similar to the Digital Markets Competition and Consumers Act 2024; namely the enhancement of consumer protection and confidence, balanced with the desire to promote business growth.

As covered in our other Horizon Scanning updates, increased enforcement powers have been given to the Competition and Market Authority (CMA) under the Digital Markets Act. It is very likely that we will see the same with the Act. The Act envisages that the secondary legislation should include and define, amongst others, powers to inspect, seize, dispose of and retain products, enter premises for relevant purposes, direct product recalls and impose increased sanctions for non-compliance, including fines and criminal offences punishable with imprisonment.

Upcoming changes in EPC requirements

The Government has proposed changes to raise the Minimum Energy Efficiency Standards (MEES) for landlords and is due to announce its decision for commercial real estate later this year.

The Government’s preference was that all non-domestic private rented properties should be required to achieve a minimum Energy Performance Certificate (EPC) rating of B by 2030 if cost effective but this is yet to be confirmed. However, it has been recognised that a deadline of 2030 was challenging and more time may be required in order to achieve bringing properties up to that standard.

How could it impact your business?

Landlords may need to invest in improving the energy efficiency of their building(s). The cost for older buildings may be significant, which could impact landlords who need to obtain funding in order to make the improvements. However, improving EPCs will allow companies to have more confidence in their potential investments.

What steps should you take?

At this current moment in time, the proposal has not come into effect. However, landlords should keep up to date with Government proposals to ensure they act on any changes when they do come into effect.

Landlords should be prepared for the upcoming change and can look to take the following steps to improve their EPC rating:

• Conduct an EPC assessment

• Invest in making properties more energy efficient

• Invest in insulation

• Upgrade heating systems

• Explore renewable energy solutions

• Explore funding options to cover the potential improvements

There may also be exemptions that apply so landlords should explore those. By being aware of the potential changes, landlords can plan for future costs of upgrades and budget accordingly.