The words that decide who gets paid

A request for payment of a valuation of work done under a contract that sets its own payment timetable, rather than an invoice for a sum already agreed.

It starts the Construction Act notice clock: the payer has five days after the due date to serve a payment notice, and if they serve nothing the sum applied for becomes the notified sum. Invoicing where the contract calls for an application can leave you outside that protection.

The date a sum falls due under the contract, and the date the notice deadlines are counted from.

Set by the contract, commonly a fixed number of days after the valuation or application date. It is not the date the money has to be paid; that is the final date for payment.

The date the money must actually be paid, set by the contract as a period after the due date.

Commonly 14 days under JCT terms. The Pay Less Notice deadline is counted backwards from it, so shortening this period shortens the payer’s window to withhold.

The payer’s statement of the sum they consider due and the basis of its calculation, which must be given not later than five days after the due date.

This is the one period in the timetable fixed by statute, section 110A(2), and a contract can shorten it but cannot lengthen it. Serve nothing and the payee’s application becomes the notified sum.

The notice a payer must serve to pay less than the notified sum, specifying the sum they consider due and the basis on which it is calculated.

Due not later than the prescribed period before the final date for payment, commonly five days. A reason is not a basis: it has to show the arithmetic. Served late it is ineffective and the notified sum becomes payable in full.

The sum that has become payable: the figure in the payer’s payment notice, or the payee’s application where no payment notice was served in time.

It is payable in full on the final date for payment unless a valid Pay Less Notice reduces it. Where it is the payee’s own application because the payer served nothing, the position is commonly called a smash and grab.

An adjudication claiming the sum applied for, on the ground that the payer served no payment notice and no valid Pay Less Notice in time.

It says nothing about what the work was worth. The entitlement comes from the notice failure rather than from the valuation, and that is the reason to track the dates.

A percentage of the value of work done that the payer holds back as security that the job will be finished and defects put right.

No statute sets a rate. Commonly 3% to 5%, often capped near 3% of the contract sum, and released in two halves: one at practical completion and the balance at the end of the rectification period. The money remains yours throughout, being a deduction from a payment and not a reduction in the contract sum.

A statutory 28-day dispute procedure available at any time on a construction contract, producing a decision binding until finally determined by litigation or arbitration.

The right to adjudicate cannot be contracted out of. It is the reason the notice deadlines have teeth: a missed Pay Less Notice is enforceable quickly rather than eventually.

A projection of money in and money out over the coming weeks, built from what has been applied for, certified and committed.

The number that matters in construction is not profit, it is whether the money arrives before the wages go out. A profitable firm with a slow payer still fails.

HMRC’s scheme requiring contractors to deduct tax at source from payments to subcontractors and pay it to HMRC on the subcontractor’s account.

The deduction is 0%, 20% or 30% depending on the subcontractor’s verified status, and it applies to the labour element of a payment only.

The part of a payment the CIS percentage is applied to: the gross payment less materials, VAT, plant hire and other allowable costs such as the CITB levy and fuel.

Everything excluded is still paid to the subcontractor in full. It comes off the base the percentage applies to, not off the payment. On labour-only work there is usually nothing to exclude, so the base is the whole payment.

Checking a subcontractor with HMRC before paying them. The check decides whether the deduction is 0%, 20% or 30%.

An unverified or unmatched subcontractor is deducted at 30% whatever status is recorded locally. Verifying is the contractor’s duty, and getting the rate wrong is a penalty matter for the contractor rather than the subcontractor.

HMRC status allowing a subcontractor to be paid with no CIS deduction, subject to business, turnover and compliance tests.

A period running from the 6th of one month to the 5th of the next. Tax month 1 is 6 April to 5 May.

A payment dated 3 May belongs to tax month 1, not to May. The CIS300 covering a period is due by the 19th of the month that period ends in.

The monthly CIS return, listing payments and deductions for a tax month, due by the 19th of the month the period ends in.

It carries two statutory declarations: that the employment status of each subcontractor has been considered, and that every subcontractor has been verified. Filing late is a fixed penalty that escalates the longer it is left.

The written statement a contractor must give each subcontractor they deducted from, within 14 days of the end of the tax month.

It is the subcontractor’s evidence of tax already paid. HMRC prescribes the information rather than the layout.

A rule shifting responsibility for VAT on construction services from the supplier to the customer, mandatory since 1 March 2021.

It applies where six conditions in VAT Notice 735 hold together. The supplier charges no VAT, states the rate that would have applied, and puts the section 55A wording on the invoice.

A customer who receives construction services for their own purposes rather than to sell the work on, typically the business that will keep, occupy or let the finished building.

A supply to an end user falls outside the reverse charge, but only where the customer confirms their status in writing. No supplier can establish it for them.

A business connected to an end user, or sharing an interest in the same land, that supplies construction services on to them.

Treated the same way as an end user: the supply falls outside the reverse charge.

Profit as a percentage of the sell price: (sell − cost) ÷ sell.

The figure that compares to everything else in a business, because turnover and overheads are also percentages of revenue. Always the smaller of the two numbers a job produces.

Profit as a percentage of cost: (sell − cost) ÷ cost.

Adding 20% to your costs makes a 16.7% margin, not a 20% one. Merchants usually talk in markup, so a rate quoted to you and the rate you report may not share a base.

The cost of running the site rather than of building anything: welfare, scaffolding, plant, supervision, fencing, insurances and the like.

Time-related rather than quantity-related, so an extension of time costs money even when no extra work is done.

A priced list of coded work items used to value work by measure rather than by lump sum, common on repairs and maintenance contracts.

Rates are agreed in advance and applied to what was actually done, often with a per-client uplift. On a social housing repairs contract you cannot raise a payable invoice without one.

Work valued on the actual labour, plant and materials used plus a percentage, where no applicable rate exists.

It needs signed daywork sheets at the time. A daywork claim assembled afterwards from memory is the one most often reduced.

An allowance in a contract sum for work not yet defined well enough to price, to be expended as instructed and adjusted against actual cost.

A defined provisional sum is one the contractor has enough information to have allowed for in their programme; an undefined one is not, and an undefined sum expended can carry an extension of time with it.

A change to the scope of the works, instructed under the contract and valued in accordance with it.

Its value is what the contract says, not what feels fair. Work done without an instruction is work done at your own risk, however obviously necessary it was.

The comparison of what a job has cost to date against what has been earned on it, run periodically to find the position before it becomes a surprise.

Its value is in catching a job going wrong in month two rather than at final account. A CVR run once at the end is a post-mortem.

The settlement of the contract sum: the original sum adjusted for variations, provisional sums, loss and expense and any deductions.

Agreeing it releases the balance of what is owed and is usually the last chance to.

The point at which the works can be used for their intended purpose, certified by the contract administrator.

It is not a defect-free state. It starts the rectification period, releases the first half of retention, and normally ends the contractor’s liability for liquidated damages.

A period after practical completion, commonly six or twelve months, during which the contractor returns to make good defects that appear.

Its end releases the balance of retention, conditional on defects being made good. Counted in whole months, so twelve months is the same date next year.

A written record of defects and incomplete work identified on inspection, each located, assigned to a trade and tracked to sign-off.

No statute defines a snag. What the list buys you is the agreement it records, so getting it signed matters more than getting it formatted.

Putting right a defect that has appeared during the rectification period.

A certificate of making good is normally what triggers the second release of retention, so chase it rather than waiting for it.

A defect not discoverable by reasonable inspection at the time, which surfaces after the rectification period has ended.

Liability runs for six years from breach on a contract under hand, and twelve on one executed as a deed.

The documents issued at completion: as-built information, certificates, warranties, test results and operating instructions.

It is usually a condition of practical completion being certified, so an incomplete pack can hold up the first release of retention.

A combined document: an assessment of the significant risks, and a statement of how the work will be carried out so they are controlled.

The assessment half carries a statutory duty under regulation 3 of the Management of Health and Safety at Work Regulations 1999. The combined format does not, but principal contractors require it.

The Construction (Design and Management) Regulations 2015, which set duties on clients, designers, principal designers, principal contractors and contractors.

Every project needs a construction phase plan, notifiable or not. Where there is more than one contractor, a principal contractor and principal designer must be appointed in writing.

The HSE notification for a notifiable project, given by the client before the construction phase begins.

A project is notifiable where construction work lasts longer than 30 working days with more than 20 workers simultaneously, or exceeds 500 person days.

The written plan setting out how health and safety will be managed during the construction phase, required on every project.

A RAMS is an input to it rather than a replacement for it.

A time-limited written authorisation for a specific high-risk activity, such as hot work, confined space entry or working at height.

It carries a valid-from and valid-to time, so it expires rather than staying open.

A short safety briefing given on site to the people doing the work, together with a signed record that it happened.

Nothing prescribes the name, the frequency or the form. Section 2(2)(c) of the Health and Safety at Work etc. Act 1974 requires information, instruction, training and supervision, and this is how it is commonly evidenced.

The briefing given before somebody first works on a site, covering its specific hazards, rules and emergency arrangements.

Usually recorded with a valid-until date, so it expires rather than lasting forever.

The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013, which require certain incidents to be reported to the HSE.

An event that could have caused injury or damage but did not, recorded so the cause can be dealt with before it does.

Recording potential severity alongside actual severity is what stops a near miss being filed as nothing happened.

The contractor engaged by the client to carry out the works, usually subcontracting most of the trades.

A contractor engaged by another contractor rather than by the client, to carry out part of the works.

Payments to a subcontractor on construction operations fall within CIS, and a subcontractor is usually a payee under the Construction Act rather than a payer.

The person named in the contract to administer it: issuing instructions, certifying payment and certifying completion.

They act for the client but must act impartially when certifying.

The contractor appointed in writing under CDM 2015 to plan, manage and monitor the construction phase where more than one contractor is involved.

The Joint Contracts Tribunal, whose standard form contracts are the most widely used in UK building work.

JCT defaults are contract terms rather than law: 30 days to the due date, 14 to the final date, five days for a Pay Less Notice. Every one of them is negotiable.

A family of standard contracts common on infrastructure and public sector work, built around early warnings and compensation events rather than variations and claims.

A subcontract where the subcontractor supplies labour and the contractor supplies the materials.

It has a direct tax consequence: with nothing to exclude, the whole payment is the CIS deduction base.

A bond given in place of cash retention, so the money stays with the contractor and the employer holds security instead.

It costs a premium and removes the risk of retention being lost in the payer’s insolvency, which is the argument for it.

An agreement giving a third party, such as a funder or a tenant, a direct contractual right against a contractor or designer.