The Association of Accounting Technicians (AAT) is the first accounting body to support a cross-party, multi-business campaign to introduce a retention deposit schemes for small businesses (SMEs).
AAT’s new scheme will end the practice of payments being withheld for and unreasonable length of time and eliminate the risk of losing retention costs through contractor bankruptcy.
The campaign is being kick-started by Conservative MP Peter Aldous, who introduced a Private Members Bill to protect retention deposits in connection with construction contracts.
This Bill is due to be read for a second time in parliament on 15th June and has already secured the support of over 150 MPs from the Conservative, SNP, Plaid Cymru, DUP, Green, Liberal Democrat and Labour parties.
AAT is the 80th organisation to confirm its support for the bill, meaning businesses and self-employed professionals totalling more than 500,000 are now represented. Other supporters include the Federation of Small Businesses (FSB), Institute of Directors (IoD) and British Chambers of Commerce (BCC).
What is retention?
Retention is money which is retained (often as much as 10%) from the SME completing construction work. It is withheld as a security in case the SME fails to rectify any future defects but in reality any future defects, but the reality is often used by the larger company to boost their working capital.
Ordinarily, the money should be returned within a 12-month period, but it can often take two or three years – there are recorded cases of cash not being returned for over a decade.
The FSB has written to all FTSE 100 companies this week asking them to tackle the practice of late payments.
Over 60 per cent of AAT’s 140,000 members are employed by, or own their own, SME.
In addition, AAT’s 4,250 licensed accountants provide accountancy and business advisory services to over 400,000 British businesses, the majority of whom are also SMEs, many of whom are stung by the payment practices of many larger organisations.
Peter Aldous MP says that he is pleased that a body from the finance world is now part of the scheme,
‘It helps confirm the economic value that Retention Deposit Schemes would have, the day-to-day benefit it would lead to for thousands of small business and the clear industry appetite for reform.’