The words on your contract,
in plain English.
63 terms used on UK construction projects, defined as they are actually used, with a link to the page that treats each one properly.
Getting paid.
The statutory payment regime, and the documents that decide whether a sum is due.
Application for payment
A subcontractor's formal request for payment for work done in a valuation period, setting out the sum claimed and how it is calculated. Where the contract provides for it, an application can also stand as the payment notice, which makes the sum in it the notified sum the payer must actively displace.
It is not an invoice and not a chase. It is the document that starts the statutory payment timetable.
Due date
The date a payment becomes due under a construction contract. Every construction contract must provide an adequate mechanism for determining it, and the payment notice and final date for payment are both measured from it.
Under the Scheme for Construction Contracts the default is seven days after the end of the relevant period, or the date the claim is made, whichever is later.
Payment notice
The notice given by the payer, not later than five days after the due date, stating the sum it considers due and the basis on which that sum is calculated. It is what fixes the notified sum for that payment cycle.
If the payer fails to give one, section 110B allows the payee to serve a default payment notice instead.
Notified sum
The sum stated in whichever payment notice validly stands for a payment cycle. Section 111 of the Construction Act requires the payer to pay the notified sum in full on or before the final date for payment, unless it has served a valid pay less notice.
Pay less notice
The payer's written notice that it intends to pay less than the notified sum. It must specify the sum the payer considers due at the date of the notice and the basis on which that sum is calculated, and it must be served before the final date for payment by the period the contract prescribes.
The Scheme's default is not later than seven days before the final date for payment. Served late, it is not a weak notice: it is not a notice at all.
Final date for payment
The date by which the money must actually be paid. It is distinct from the due date, which only starts the clock, and the Scheme's default is seventeen days after the due date.
Smash and grab
An adjudication brought on the basis that no valid payment notice or pay less notice was served, so the notified sum is payable in full regardless of what the work was worth. It asks nothing about value.
The payer can generally then start a separate true value adjudication, so it is usually a timing and cash flow advantage rather than a permanent one.
Pay when paid
A contract term making payment conditional on the payer first receiving payment from someone else. Section 113 of the Construction Act makes such terms ineffective, with one exception: where that third party is insolvent.
Retention
A percentage deducted from every interim valuation and held by the paying party as security against defects. Commonly three or five per cent on subcontracts, usually capped, and released in two halves.
It is not held in trust unless the contract says so, which most do not. That makes it working capital in somebody else's business.
Defects liability period
The period after practical completion during which the contractor remains liable to return and rectify defects. Commonly twelve months, sometimes six on short works and up to twenty-four on mechanical and electrical packages.
Its end date governs the second half of retention, which is the half firms most often fail to collect. Also called the rectification period.
Making good certificate
The document confirming that defects notified during the defects liability period have been rectified. On many contracts the second half of retention falls due on this certificate rather than simply at the end of the period.
If nobody asks for the certificate, the money never becomes due, and it is not late in any contractual sense.
Final account
The agreed statement of the total sum payable for the works, settling the original contract sum together with variations, remeasurement, claims and adjustments.
Retention sits behind it, so a final account that drifts takes the retention with it.
Default payment notice
A notice given by the payee under section 110B where the payer has failed to give its own payment notice. The sum stated in it becomes the notified sum, and the final date for payment is postponed by the same number of days as the delay.
Where the contract provides for the payee to make an application, a properly made application can serve this purpose. It is the most under-used right in the payment regime.
True value adjudication
An adjudication deciding what the work was actually worth, as distinct from what the notices made payable. A payer that has paid a notified sum it disputes can bring one to recover an overpayment.
The payer generally has to pay the notified sum first rather than raising valuation as a defence, which is where the commercial value of a smash and grab comes from.
Statutory interest
Interest chargeable on a late commercial debt under the Late Payment of Commercial Debts (Interest) Act 1998, at eight percentage points above the Bank of England base rate, as simple rather than compound interest.
A fixed compensation sum is due in addition, of £40, £70 or £100 depending on the size of the debt, plus reasonable recovery costs above that.
Contracts and claims.
The statutory framework, and the mechanisms that resolve a dispute without going to court.
The Construction Act
The Housing Grants, Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009. It gives parties to a construction contract a statutory payment timetable and the right to adjudicate at any time.
Contracts with a residential occupier are excluded by section 106. Since 1 October 2011 it applies to contracts that are not in writing.
The Scheme for Construction Contracts
The statutory default terms that apply where a construction contract fails to provide compliant payment or adjudication provisions. It fills gaps rather than overriding a contract that already complies.
England and Wales, Scotland and Northern Ireland each have their own version, so an English default period cannot be lifted onto a Scottish job.
Adjudication
A statutory dispute procedure available to any party to a construction contract at any time. The adjudicator must reach a decision within twenty-eight days of referral, and that decision binds the parties until the dispute is finally determined by court, arbitration or agreement.
The period can be extended by fourteen days with the referring party's consent, or longer if both sides agree after referral. Parties generally cannot recover their own legal costs.
Suspension for non-payment
The right under section 112 of the Construction Act to suspend performance of any or all obligations where the notified sum has not been paid by the final date for payment, after giving at least seven days' written notice.
It carries an entitlement to reasonable costs and expenses and to time for the delay. Leaving site without serving the notice forfeits both.
Variation
A change to the scope of the works instructed after the contract was formed, valued and added to or deducted from the contract sum.
The recurring problem is not entitlement but evidence: a verbal instruction is still an instruction, but it has to be capable of being proved.
Dayworks
Work valued on the basis of the labour, plant and materials actually used, rather than against a contract rate, usually where no applicable rate exists.
Dayworks sheets signed on site at the time are among the most useful records a subcontractor can hold.
Practical completion
The point at which the works are complete enough for the employer to take possession and use them, notwithstanding minor outstanding items. It triggers the start of the defects liability period and the first release of retention.
On a subcontract it matters greatly whether release turns on your practical completion or the main contract's.
Liquidated damages
A sum stated in the contract as payable for each period of delay beyond the completion date, agreed in advance so neither party has to prove actual loss.
Condition precedent
A contractual requirement that must be satisfied before an entitlement arises, most often a notice given within a stated period. Miss the window and an otherwise good claim can be barred entirely.
This is one of the few places in construction where the paperwork genuinely is the whole thing, so it is worth knowing which of your contract clauses are drafted this way.
Extension of time
Additional time granted for completion where a delay is caused by an event the contract puts at the employer's risk. It protects against liquidated damages and is a separate entitlement from any money claim.
Time and money are claimed separately. Firms routinely secure one and forget the other.
Contemporaneous records
Records created at the time the events happened rather than reconstructed later: site diaries written daily, dayworks signed on the day, dated photographs. They are the evidence almost every construction claim turns on.
A diary written up on Friday for the whole week is worth considerably less than one written each day, and both sides know it.
Tax and CIS.
The two schemes that take a slice of a construction invoice before it reaches you.
Construction Industry Scheme (CIS)
The HMRC scheme under which a contractor deducts tax at source from payments to subcontractors and pays it to HMRC on their behalf. The deduction is a payment on account of the subcontractor's eventual tax, not a charge.
Rates are 20% for registered subcontractors, 30% for unregistered or unverified, and 0% with gross payment status.
Gross payment status
CIS registration that allows a subcontractor to be paid without any deduction at source, so it receives the full value of its invoices and settles its tax in the ordinary way.
It has business, turnover and compliance tests to meet and an ongoing compliance record to keep. For a labour-heavy firm it is the single largest cash flow improvement available.
CIS deductions suffered
The amounts deducted from a subcontractor's own payments under CIS. A limited company recovers them by reporting them on its Employer Payment Summary, which offsets them against its PAYE and related liabilities.
There is no in-year route to Corporation Tax. Only after the tax year ends can an unrecovered balance be set against it or repaid.
Employer Payment Summary (EPS)
A payroll submission made to HMRC through Real Time Information, used among other things to report CIS deductions suffered so they can be offset against PAYE, National Insurance and student loan liabilities.
An EPS filed without the CIS figures is the most common single reason a construction company is carrying a large balance with HMRC.
VAT domestic reverse charge
The rule, in force since 1 March 2021, under which the customer rather than the supplier accounts for VAT on most construction services between VAT registered businesses where the payment is reported under CIS. The supplier invoices without adding VAT.
It is the default where the conditions are met. A written end user statement switches it off; nothing switches it on.
End user
A business, or group of businesses, that is VAT and CIS registered but does not make onward supplies of the construction services it receives. Supplies to an end user fall outside the VAT reverse charge.
Only once the end user has told the supplier in writing. A verbal assurance changes nothing.
Intermediary supplier
A VAT and CIS registered business connected or linked to an end user, which buys construction services and resupplies them to that end user. Supplies to an intermediary supplier fall outside the reverse charge on the same written notification basis.
CIS verification
Checking a subcontractor with HMRC before paying them, which returns the rate the contractor must deduct at: 20% for those registered under CIS, 30% for those who cannot be verified, and nil for those with gross payment status.
Deducting at the wrong rate is the contractor's problem rather than the subcontractor's, so verification belongs at onboarding.
Payment and deduction statement
The statement a contractor must give a subcontractor showing the payment made and the CIS deduction taken from it. It is the evidence a subcontractor needs to recover those deductions.
Firms that file these as they arrive have a straightforward year-end claim. Firms that have to ring round eleven contractors for copies have a long one.
The 5% disregard
A relief allowing the VAT reverse charge to be ignored where reverse charge services are 5% or less of the value of a supply. It is agreed by both parties at the start of the contract on the overall contracted values, not reassessed invoice by invoice.
Estimating and commercial.
The words that decide whether a job made money, and whether anybody knew in time.
Preliminaries
The costs of running a site that are not attributable to any single item of measured work: supervision, welfare, scaffolding, plant standing, temporary services, insurances and the like.
Prelims are the most commonly under-priced part of a tender, because they are the part that is not drawn.
Provisional sum
An allowance included in a contract sum for work that cannot be properly specified when the contract is entered into. It is expended and adjusted when the work is instructed and valued.
Whether it is defined or undefined changes who carries the programme and preliminaries risk.
Remeasurement
Valuing work by measuring what was actually built against contract rates, rather than paying a fixed lump sum.
Star rate
A rate agreed for work that has no applicable rate in the contract, usually built up from first principles and used to value a variation.
Margin and markup
Markup is the percentage added to cost to reach the selling price. Margin is the percentage of the selling price that is profit. They are different numbers: a 20% markup produces a margin of about 16.7%.
Confusing the two is a common and expensive way to price work at less profit than intended.
Committed cost
Cost a project has irrevocably taken on but not yet been invoiced for, such as an issued purchase order or an instructed subcontract package.
A job costing view that shows only invoices received understates the true position, sometimes by a great deal, and always in the wrong direction.
Aged debt
Outstanding invoices or applications grouped by how long they have been unpaid, normally in bands of current, thirty, sixty, ninety and one hundred and twenty plus days.
Prime cost sum
An allowance in a contract for materials or goods to be supplied by a nominated or selected supplier, where the price is not known when the contract is made. Adjusted against the actual cost when it is.
Often shortened to PC sum, and distinct from a provisional sum, which covers work rather than supply.
Cost value reconciliation
The periodic comparison of what a job has cost against what it has earned, to establish whether it is making the margin it was priced at. Usually shortened to CVR.
A CVR that counts only invoices received rather than committed cost understates the position, always in the same direction.
Overhead recovery
The share of a firm's fixed running costs that each job is priced to carry. Work won at a rate that covers direct cost and margin but not overhead loses money at the company level while appearing profitable on the job.
Health, safety and compliance.
The duties, the documents and the acronyms that decide whether you can be on site at all.
RAMS
A risk assessment and method statement issued together. The assessment identifies the hazards in an activity and the controls that reduce them; the method statement describes the sequence in which the work will be done with those controls built in.
A RAMS that has not been briefed to the people doing the work has been filed rather than implemented.
CDM 2015
The Construction (Design and Management) Regulations 2015, which allocate health and safety duties across the client, designers, the principal designer and the principal contractor on every construction project in Great Britain.
Principal contractor
The contractor appointed under CDM 2015 to plan, manage and monitor the construction phase where a project involves more than one contractor. The duty attaches to the role, not to the size of the firm.
A second contractor arriving on site is enough to engage it, which is how small firms end up holding the duty without noticing.
F10
The notification given to the Health and Safety Executive for a notifiable construction project under CDM 2015.
CSCS card
A card issued under the Construction Skills Certification Scheme recording that the holder has the training and qualifications for their occupation, together with a health and safety test. It is not a legal requirement but most principal contractors require one for site access.
SSIP
Safety Schemes in Procurement, the umbrella body whose member schemes assess a contractor's health and safety arrangements. Its mutual recognition arrangement means an assessment by one member scheme is generally accepted by another.
That mutual recognition is the point: it is what stops a firm being assessed separately for every supply chain it joins.
RIDDOR
The Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013, which require certain workplace incidents to be reported to the enforcing authority.
LOLER thorough examination
The periodic examination of lifting equipment required under the Lifting Operations and Lifting Equipment Regulations 1998, carried out by a competent person and recorded in a report.
The report is the thing an inspector asks for, which is why the expiry date matters as much as the examination.
Construction phase plan
The document the principal contractor must prepare before the construction phase begins, setting out how health and safety will be managed on that project. It has to be reviewed and revised as the work changes.
A plan written once and never touched is not a plan, and the monitoring behind it is what most firms cannot evidence.
Health and safety file
The record of information about a structure that anyone carrying out later construction work on it will need to do so safely. Compiled during the project and handed to the client at the end.
Notifiable project
A construction project that must be notified to the Health and Safety Executive on form F10, based on its duration and workforce size. It is a separate question from whether a principal contractor is required.
The two thresholds are constantly conflated. A project can need a principal contractor without being notifiable, and that combination is very common.
Duty holder
Anyone carrying a defined role under CDM 2015: the client, the designer, the principal designer, the contractor or the principal contractor. The duties attach to the role rather than to the size of the organisation.
Gateway 2
The Building Safety Act approval stage that must be passed before construction begins on a higher-risk building. Applications are made to the Building Safety Regulator and cannot be started until it is granted.
Reported turnaround times have run well beyond the target, and the programme and cash consequences fall on subcontractors who are not the applicant.
Plant, assets and site equipment.
The vocabulary of the kit you own, hire and are still being charged for.
Off-hire
Formally ending a plant hire so charges stop. Hire runs until the item is off-hired, not until you finish with it, and the off-hire number or reference is the evidence that it was done.
Kit sitting in a compound on a finished job, still on hire because nobody made the call, is one of the most common preventable losses in contracting.
Asset register
The record of every item a firm owns, with its serial number, value, location and service history. It is what an insurer asks for after a theft, and it has to exist before the theft rather than after.
PPM
Planned preventative maintenance: servicing carried out to a schedule to keep an asset working and compliant, rather than in response to a failure. Usually driven by dates held against each asset.
Plant on hire
Equipment held under a hire agreement rather than owned. It does not belong to you, which matters both for insurance and for what an administrator can and cannot take if the hirer fails.
Where these come from.
The definitions above are short by design. These go into the detail, and every one of them is written for somebody running the job rather than advising on it.