Explanatory Note
(This note is not part of the Order)
This Order brings into force the Late Payment of Commercial Debts (Interest) Act 1998 for the purposes of the second phase, that is, in relation to commercial contracts for the supply of goods or services where the supplier is a small business and the purchaser is a small business (article 3). This is the fourth commencement order.
Article 2 provides for the definitions of “small business supplier” and “small business purchaser” and “United Kingdom public authority”. By Article 2(2), a small business is one which has 50 or fewer full-time employees when calculated in accordance with Schedule 2 to the Late Payment of Commercial Debts (Interest) Act 1998 (Commencement No. 1) Order 1998 (“the first commencement order”).
An employee is defined (paragraph 2 of Schedule 2 to the first commencement order) to include persons who work in the business both under a contract of employment and other than under such a contract, e.g. partners and a sole owner. Provision is made for the counting of part-time employees as fractions of full-timers (paragraph 3 of Schedule 2 to the first commencement order) and employees in associated businesses are counted (paragraph 6 of Schedule 2 to the first commencement order). Taking the period of 1st April to 31st March (or a shorter period for new businesses) preceding making the contract (paragraph 4 of Schedule 2 to the first commencement order), the average is taken of the numbers of employees over that period (paragraph 5).