Construction Act payment rules: the regime end to end

Published 27 July 2026 · VariationFlow

The Construction Act payment rules explained for UK subcontractors: how the due date, payment notice, pay less notice and final date fit together, what the Scheme fills in when the contract is silent, why pay-when-paid is banned, and the right to suspend for non-payment.

A drylining subcontractor applies for £84,000 on the 25th of the month, as it has every month. This time nothing comes back, no certificate, no notice, no call. Twenty days later, £41,000 arrives with a remittance saying “on account”. Whether that is a problem the subcontractor has to negotiate, or a statutory debt of £43,000 the payer now owes in full, depends entirely on a handful of dates and notices set by an Act of Parliament, and on whether anyone was watching them.

What are the Construction Act payment rules?

The Construction Act payment rules are the statutory payment regime in Part II of the Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009). They apply to almost every commercial construction contract in the UK and they impose four things: an adequate mechanism for deciding what is due and when; a payment notice from the payer (or, failing that, the payee) stating the sum considered due; a pay less notice if the payer intends to pay less than that notified sum; and a ban on making payment conditional on being paid up the chain. Where a contract fails to provide any of this, the Scheme for Construction Contracts fills the gaps automatically.

Which contracts do the rules apply to?

The Act applies to “construction contracts” as defined in sections 104–105, which catches ordinary building, engineering and fit-out work, subcontracts, and consultant appointments alike, whether or not the contract is written. The exclusions matter as much as the rule: contracts with a residential occupier (a homeowner having work done on their own home, section 106) sit outside the Act entirely, which is why domestic jobs run on consumer law rather than payment notices. A few sectors and contract types are also excluded, but for a trade subcontractor working for a main contractor, the safe assumption is that the Act applies.

How does the payment cycle actually run?

• The due date. The contract must provide an adequate mechanism for fixing when a payment becomes due. If it doesn’t, the Scheme steps in: for periodic payments, the sum becomes due on the later of seven days after the end of the payment period and the date the payee makes its claim.
• The payment notice. Not later than five days after the due date, the payer (or a specifier such as the contract administrator) must give a notice stating the sum it considers due and the basis of calculation, section 110A. This applies even if the sum is zero.
• The payee’s default notice. If the payer’s notice never arrives, section 110B lets the payee’s own application or notice state the sum, and where the contract already provides for an application before the due date, that application does the job automatically.
• The catch nobody counts. A default notice served after the payer’s own notice fell due drags the final date for payment with it. Section 110B(3) postpones that final date by the same number of days as the delay, and because the pay less deadline is counted back from the final date, it moves too. Serve your default notice eight days late and the payer has eight more days to pay and eight more days to serve a pay less notice. A notice given before the payer’s deadline, which is what an ordinary interim application is, postpones nothing.
• The pay less notice. A payer who intends to pay less than the notified sum must say so, with the sum it considers due and the basis of calculation, no later than the prescribed period before the final date for payment, section 111. Under the Scheme that period is seven days.
• The final date for payment. The contract fixes how long after the due date payment must actually be made; the Scheme’s default is 17 days from the due date. By the final date, the notified sum (as reduced by any valid pay less notice) must be paid in full.

Is any of this different in Northern Ireland?

Every number is the same and the way you count them is not. Part II of the Construction Act does not extend to Northern Ireland at all. The parallel regime is the Construction Contracts (Northern Ireland) Order 1997, amended in 2012 to mirror the 2009 changes, and article by article the figures are identical: five days for the payment notice, seven for the pay less notice, seven for a notice of intention to suspend, seventeen to the final date, twenty eight for the Scheme’s relevant period. Read them side by side and not one differs.

What differs is the counting, and it runs the opposite way. Section 116 of the Act EXCLUDES Christmas Day, Good Friday and bank holidays from the count. The Order has no reckoning provision at all, so section 39 of the Interpretation Act (Northern Ireland) 1954 applies instead, and section 39 is a roll rather than an exclusion: a holiday inside the period is counted, and only if the last day lands on a Sunday or a public holiday does the deadline move to the next day that is neither. So a bank holiday in the middle of a period makes a Belfast deadline fall a day earlier than a Birmingham one, and running the Act’s rule on a Northern Irish job produces a date a day too late per holiday, which is how a late pay less notice comes to look timely. Saturday is not in section 39 either: a Northern Irish deadline can fall on a Saturday and stand.

The split follows the site, not the head office. The Act applies to contracts for construction operations in England, Wales or Scotland; the Order applies to operations in Northern Ireland. A Belfast job run by a London company is on the Order and not on the Act, so the question the setting is asking is where the work is.

What happens if the payer serves no notices?

Then the number in play is yours. With no payment notice and no pay less notice, section 111 makes the notified sum, typically the amount in your application, payable in full by the final date, whether or not the payer agrees with the valuation. That is the mechanism behind the “smash and grab” adjudication: the adjudicator is not asked what the work was worth, only whether the notices arrived on time. Count the final date carefully before you start one. If you served a default notice late, section 110B(3) has already moved that date, and an adjudication begun against the unpostponed date is begun against a payer who was not yet in default. The Court of Appeal in S&T (UK) Ltd v Grove Developments confirmed the discipline runs both ways: the payer must pay the notified sum first, and only then may it start its own “true value” adjudication to argue the merits. Pay now, argue later.

Is pay-when-paid really banned?

Yes, with one narrow exception. Section 113 makes any clause ineffective if it makes payment conditional on the payer receiving payment from a third party, unless that third party (or someone whose payment is a condition of its payment) is insolvent. The 2009 amendments closed the obvious workaround too: a mechanism that makes payment conditional on obligations being performed under another contract, pay-when-certified up the chain, is not an adequate mechanism, and the Scheme’s provisions replace it. If your subcontract says you get paid “upon certification under the Main Contract”, that clause is very likely doing nothing except discouraging you from asking.

Can I stop work if I’m not paid?

Section 112 gives an unpaid payee a statutory right to suspend performance, all of it, or any part of it, where the sum due is not paid in full by the final date and no valid pay less notice was given. The right needs seven days’ written notice stating the ground, and it comes with teeth: you are entitled to a reasonable amount for costs and expenses reasonably incurred in exercising it, and the time lost (including remobilisation) does not count against your completion obligations. Used properly, a suspension notice concentrates a payer’s mind faster than any solicitor’s letter. Used casually, without the notice, or where a pay less notice was actually valid, downing tools is a repudiation risk, so check the conditions are genuinely met first.

The rules only pay if you run the clocks

• Diarise the cycle from the contract, not from habit: application date, due date, the five-day payment-notice window, the pay less deadline and the final date, every month.
• Make every application clean enough to stand as the notified sum, numbered, dated, the sum and its basis, served exactly as the contract requires.
• Log what arrives and when: a payment notice received on day six, or a pay less notice a day inside the final date, changes what you are owed. The dates are evidence. Treat them like it.
• When the final date passes unpaid, act while the position is fresh: statutory interest accrues, the suspension right is available on notice, and a notified-sum adjudication is designed to be quick.
• Check your contract’s amendments: the Act sets the floor, but bespoke schedules routinely stretch final dates and shrink notice periods. Know which dates are yours before the first application goes in.

VariationFlow runs this machinery for you: the payment timeline projects every cycle’s due date, notice window, pay less deadline and final date from your contract profile, reckoned the way section 116 of the Act reckons them (Christmas Day, Good Friday and bank holidays are left out of the count, and a weekend is not, so a final date can fall on a Saturday and the timeline says so), and reckoned differently again on a Northern Irish site, where the timeline follows the Order and section 39 of the Interpretation Act (Northern Ireland) 1954 instead, the notified-sum tracker flags a smash-and-grab position the moment the payer’s notices go missing, and payment applications generate print-ready with the statutory dates on their face. This guide is general information, not legal advice, payment terms vary by contract, so verify every date and mechanism against your executed contract and take advice on live disputes.