On most building contracts the contractor is paid in instalments as the work progresses rather than in one sum at the end. Each instalment follows an interim valuation of the work done. The Housing Grants, Construction and Regeneration Act 1996 gives a party to a construction contract the right to payment by instalments, stage payments or other periodic payments, unless the work is specified in the contract as lasting less than 45 days. JCT contracts set out their own valuation and payment cycle, so check your own contract.
The interim payment cycle
- Application: the contractor submits an application setting out the sum it considers due, usually before the valuation date.
- Valuation: the quantity surveyor values the work at the valuation date.
- Payment notice or certificate: the payer, or a specified person, gives a payment notice within five days of the payment due date (s.110A). On many JCT forms an interim certificate does this job.
- Pay less notice: if the payer intends to pay less than the notified sum, it must give a pay less notice in time (s.111).
- Payment: the notified sum, or the amount in a valid pay less notice, is paid by the final date for payment.
What goes into an interim valuation
- Work done: the value of work properly carried out, usually based on the contract sum analysis or bills of quantities, trade by trade.
- Preliminaries: site set-up, management and other time-related and fixed costs, valued in line with progress or as set out in the contract.
- Variations: the value of instructed changes, agreed or assessed.
- Materials on site: materials delivered for incorporation in the works, where the contract allows payment for them.
- Materials off site: only where the contract allows, usually for listed items and subject to conditions such as proof of ownership, insurance and identification. A vesting certificate is commonly used to record these conditions.
- Other amounts: such as loss and expense and fluctuations where the contract provides for them.
Deductions
- Retention: a percentage held back from the gross valuation, often reduced after practical completion and released at the end of the defects period, as the contract provides.
- Amounts previously paid: earlier certificates or payments are deducted to arrive at the amount due this period.
VAT is added where it applies. For CIS-registered payments between VAT-registered businesses, the VAT domestic reverse charge may apply; see CIS and the domestic reverse charge explained.
A simple worked example
| Item | £ |
|---|---|
| Work done to date | 180,000 |
| Preliminaries to date | 24,000 |
| Variations to date | 8,500 |
| Materials on site | 6,000 |
| Gross valuation | 218,500 |
| Less retention at 3% | (6,555) |
| Less previously certified | (162,000) |
| Net due this period (before VAT) | 49,945 |
Figures are invented for illustration. The retention percentage and what may be included are set by your contract.
Who carries out the valuation
On traditional JCT contracts the quantity surveyor usually values the work and the architect or contract administrator issues the interim certificate. On Design and Build contracts the contractor's application and the employer's response follow the procedure set out in that contract. Subcontract valuations follow the subcontract. Check your own contract for who does what and by when.
If the amount is disputed
Section 108 of the Act gives a party to a construction contract the right to refer a dispute to adjudication at any time, including a dispute about an interim valuation. Separately, if the notified sum is not paid by the final date and no valid pay less notice was given, section 112 gives the payee the right to suspend performance after at least seven days' notice.
Good records
- Keep the valuation, the application and the notice or certificate together for each period.
- Keep a variation register so every change is captured.
- Keep evidence for materials on and off site.
Sources
- Housing Grants, Construction and Regeneration Act 1996, Part II, ss.109-111
- Scheme for Construction Contracts (England and Wales) Regulations 1998
Templates for this task
- Monthly Valuation Workbook – £3.50
- Interim Valuation Certificate – £3.50
- Application for Payment – £3.50
- Variation Register – £3.50
- Vesting Certificate – £3.50
Check before use – not legal advice. This guide states the law and official guidance as facts, in our own words, as checked on 2 November 2026. It does not replace professional advice on a specific matter. Contains public sector information licensed under the Open Government Licence v3.0.