The Business Contract Terms (Assignment of Receivables) Regulations 2018 came into force on 31 December 2018, introducing a major shift in how invoice finance and receivables assignment are handled in the UK.
These Regulations make ban on assignment clauses unenforceable in certain commercial contracts, improving access to finance for small and medium-sized enterprises (SMEs).
What Is a Ban on Assignment?
A ban on assignment is any contract term that restricts the transfer of a right to receive payment under the contract. In invoice finance, such clauses previously prevented businesses from selling unpaid invoices to finance providers, creating a major barrier to working capital access.
What Has Changed?
Under the new rules, any clause in a qualifying contract that restricts or prohibits the assignment of a receivable—the right to be paid for goods, services, or other intangible assets—is now unenforceable. This change directly supports businesses seeking to assign invoices to a lender, such as in invoice financing or factoring arrangements.
The Regulations also invalidate related restrictions, such as clauses that:
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Impose conditions on assignments,
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Allow one party to determine the validity or value of the receivable, or
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Restrict enforcement rights of an assignee (typically the finance provider).
In total, 13 categories of restrictions are now legally ineffective in qualifying contracts.
Who Do the Regulations Apply To?
The Regulations apply only to contracts entered into on or after 31 December 2018 and where the supplier is an SMEas defined under UK legislation. Importantly, the SME status is assessed at the time of the assignment, not when the contract is signed.
Eligible contracts must involve:
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The supply of goods, services, or intangible assets, and
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A right to payment under the contract.
These changes are intended to benefit SMEs by removing legal barriers that previously blocked access to receivables-based finance.
Key Exemptions: When the Regulations Do Not Apply
The Regulations do not apply to all contracts.
Key exemptions include:
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Contracts for financial services
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Contracts related to energy, land, or certain commodities
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Business purchase, share purchase, and project finance agreements
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Operating leases
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Contracts where none of the parties operate in the UK
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Contracts governed by foreign law (if done to evade the Regulations)
Also, they exclude contracts where the supplier is not an SME or is a special purpose vehicle (SPV).
What This Means for Invoice Finance
By removing the enforceability of anti-assignment clauses, the Regulations unlock greater access to invoice finance for UK SMEs. Businesses can now assign receivables to lenders without being blocked by restrictive contract terms—improving cash flow and financial flexibility.
While some restrictions still apply, this legislative change significantly expands invoice finance opportunities for growing businesses.
Seasoned professional with a strong passion for the world of business finance. With over twenty years of dedicated experience in the field, my journey into the world of business finance began with a relentless curiosity for understanding the intricate workings of financial systems.