| CISR15600 | Action guide contents |
Some contracts relating to construction operations allow the
contractor to retain a portion of the contract price for a period
after the construction work has been completed. This is done so
that if deficiencies in the work done become apparent in this
period the final payment can be withheld until the subcontractor
has made good the faults. If the contractor is satisfied at the end
of this period the payment withheld is released to the
subcontractor. These payments are known as 'retention payments'.
There are no special rules for retention payments. They are
treated in the same way as any other payments. Whether the
retention payment is made gross or under deduction depends on the
subcontractor's payment status at the date of payment, not when the
work was done.
Retention periods can last for years and it may be that in
this period the subcontractor's circumstances change. The business
may cease or gross payment status held when the work was done may
no longer be held when a retention payment is due to be paid. On
the other hand, a subcontractor who was only entitled to be paid
under deduction when the work was done may have qualified for gross
payment by the time payment is made entitling them to receive the
payment in full.
