AAT (Association of Accounting Technicians) has become the first accounting body to support a cross-party, multi-business campaign for the introduction of a retentions deposit scheme for small businesses.
The new scheme will put an end to the practice of payments being withheld for an unreasonable length of time and eliminate the risk of losing retentions through contractor bankruptcy.
The campaign has been kick-started by Conservative MP Peter Aldous who introduced a Private Members Bill to protect retention deposits in connection with construction contracts. This bill, due to be read a second time in Parliament on 15 June 2018, 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 in total. Other supporters include the Federation of Small Businesses, Institute of Directors and British Chambers of Commerce.
Retentions are 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 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 and there are recorded cases of monies 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% 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 have been stung by the payment practices of many larger organisations.
Peter Aldous MP said:
“To have a body from the finance and accounting world on board with the campaign is a great development. 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 businesses and the clear industry appetite for reform.
“AAT represent a very diverse range of financial experts, from blue-chip corporate giants and public-sector institutions to micro-businesses and everything in between. I am very pleased to welcome them as the 80th organisation to back my bill.”
Mark Farrar, AAT chief executive said:
“AAT is very pleased to support this much needed and long overdue campaign. Retentions in the construction industry can seriously impact on the productivity of SMEs and in some cases their viability. They also serve to increase the overall cost of construction.
“Billions of pounds of SME cash is currently tied up in retentions that are being held for unreasonable amounts of time. That is money which could be better put to use helping SMEs survive, grow and succeed.
“AAT therefore supports moves to ensure retentions are placed in a government backed scheme, similar to the way shorthold tenancy deposits are currently saved.”