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INVOICE
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Construction invoicing has its own law
The Housing Grants, Construction and Regeneration Act — the Construction Act — gives construction contracts a statutory payment framework that overrides unhelpful contract terms. It applies to most construction work in the UK, and it is significantly in the contractor’s favour once you understand it.
Applications for payment, not just invoices
On many contracts you submit an application for payment by a specified date, rather than simply invoicing when you feel like it. The payer must then respond with a payment notice within five days saying what they intend to pay and why.
If they fail to issue that notice, your application generally becomes the notified sum — and they must pay it in full. Missed notices are one of the most common reasons disputed sums end up being paid without argument.
Submit applications on time and in the format the contract specifies. A valid application submitted a day late can lose you the protection entirely, and the sum with it.
Pay less notices
If the payer wants to pay less than the notified sum, they must serve a pay less notice before the final date for payment, setting out the amount and the basis for it. No valid pay less notice means the full sum falls due regardless of any dispute about the work.
Retention
Retention is typically 3–5% held back from each payment, with half released at practical completion and the balance at the end of the defects period — often twelve months later. Show it explicitly on every invoice so the amount outstanding is never in doubt, and diarise the release dates. Unclaimed retention is one of the largest sources of quiet losses in the trade.
And CIS on top
Most construction invoices also carry a CIS deduction of 20% or 30% on the labour element. Materials are excluded, so split them out clearly — otherwise the contractor may deduct from the full invoice value.
Common questions
What is an application for payment?
A formal request under the Construction Act, submitted by a contractual date. If the payer does not respond with a payment notice in time, your application generally becomes the sum they must pay.
What is a pay less notice?
A notice the payer must serve before the final payment date if they intend to pay less than the notified sum, stating the amount and the reasons. Without one, the full sum falls due.
How much retention is normal in construction?
Typically 3–5%, with half released at practical completion and the balance after the defects period, commonly twelve months later.
Is CIS deducted from materials?
No. The deduction applies to the labour element only, so show materials separately on the invoice.