What is a contra-charge? The deduction, the basis it has to show, and the two questions to ask the same day

Published 23 September 2026 · VariationFlow

A plain-English guide to contra-charges for UK subcontractors: what a contra-charge is, the two things a payer needs before it can deduct one (a right to deduct and a compliant notice), what section 111 says a pay less notice must show, why a one-line deduction is a position and not a bill, and how to answer one without losing the relationship.

The pay less notice arrives at five to five on the last day it could. It takes £7,200 off for “scaffold attendance and site cleaning”, on one line, with no breakdown. Nobody on your side knows what scaffold, which dates, or whose rubbish. The site manager, asked in the car park the next morning, says it came from the QS. The QS, asked by email, says it came from site. The money comes off the payment on the final date, the line reappears on every application after it, and by the final account it has become part of the furniture.

That is a contra-charge working exactly as intended, and most of the ones subcontractors pay are never questioned. This is what a contra-charge is, what the payer has to have before it can take one, and what to ask the day it lands.

What a contra-charge is

A contra-charge is a sum the paying party deducts from what it accepts it owes you, for something it says you caused it to spend. The usual heads are attendance and scaffold you used and did not pay for, cleaning and waste removal, damage to other trades’ work or to the building, making good your defects with somebody else, delay damages passed down from the main contract, and the cost of managing a problem you are said to have created. The word comes from the accountant’s contra entry: an item set against the account rather than added to it.

Two things about the word. It is not a term of art in the Construction Act or in the standard forms, which talk about set-off, deductions and the sum the payer considers due. And it is not the same as retention. Retention is a contractual deduction taken in arriving at the sum due, at a percentage you agreed when you signed. A contra-charge is a claim against you, dressed as a deduction, and it needs a basis in the same way any claim does.

Two things the payer needs, not one

A contra-charge is only good if the payer has both a right to deduct it and a compliant notice of it. Most arguments about contra-charges only ever look at the first, and most contra-charges that get paid fail on the second.

• A right to deduct. Either a term of the sub-contract that lets the contractor set off that kind of cost, or a claim for damages for a breach it can prove. Most sub-contracts have a set-off clause; read yours for what it covers, what notice it requires and whether it needs the cost to have been incurred rather than estimated. A bespoke clause that lets the contractor deduct “any sum it considers due from the subcontractor under this or any other contract” is common and is worth knowing about before you sign, not after.
• A compliant notice. Under section 111 of the Housing Grants, Construction and Regeneration Act 1996 the payer must pay the notified sum by the final date for payment unless it has given a pay less notice in time. A payer that intends to deduct a contra-charge from a sum it has already notified has to say so in a pay less notice served no later than the prescribed period before the final date, seven days under the Scheme for Construction Contracts where the contract is silent, and the notice has to state the sum it now considers due and the basis on which that sum is calculated. A deduction with no notice, or a late one, does not reduce the notified sum, whatever the merits.

The payer can also build a contra-charge into its own payment notice, the one due within five days of the due date under section 110A, because that notice states the sum the payer considers due and the basis of it. Either way, the requirement is the same: a sum and a basis, in a notice, in time. The Court of Appeal in S&T v Grove put the sequence plainly. The notified sum is paid first, and the true value is argued afterwards.

What “the basis” means

The Act does not define it, and adjudicators have been generous to payers about the form, but a basis has to let the payee understand how the figure was reached. One line reading “attendance and cleaning, £7,200” tells you the payer’s position. It does not tell you what was done, on which dates, by whom, at what rate, or under which clause of your sub-contract it is recoverable, and every one of those is a thing you are entitled to ask for and to answer.

So a contra-charge is a position, not a bill, until it carries a basis you can test. Most of them were assembled at four o’clock from a spreadsheet of site costs somebody had to put somewhere, and they dissolve on contact with a specific question. A minority are real, and those you concede, because conceding the real ones is what makes your challenge to the others credible.

The two questions, the same day

Reply in writing on the day the notice arrives, to the person who sent it and to the contractor’s quantity surveyor, and ask two things.

• What is the basis? For each line: what was done, where, on which dates, by whom, at what rate, and what document shows it. A scaffold charge should come with the scaffolder’s invoice and the dates your operatives were on it. A cleaning charge should come with the skip tickets and a record of whose waste it was.
• Under which clause? Which term of the sub-contract entitles the contractor to deduct this kind of cost, and were its own conditions met: notice to you first, an opportunity to do the work yourself, a cost incurred rather than estimated.

Then answer each head on its own evidence. Your daywork sheets, allocation sheets and site diary say whether your gang was on that scaffold on those dates. Your photographs say whose rubbish was in the skip. Your instruction register says whether the work they are charging you to redo was ever yours. Answer what you can answer, concede what you cannot, and keep the correspondence, because a contra-charge that was challenged in writing on the day and never substantiated is a very different thing at final account from one that sat unanswered for a year.

When the notice itself is the problem

Before you argue the merits at all, count the dates. A pay less notice served after the prescribed period is out of time and, on the current authorities, a nullity: the notified sum stands and is payable in full on the final date, and the deduction is something the payer can pursue afterwards through a true-value adjudication, having paid. That count is reckoned under section 116 of the Act, which takes only Christmas Day, Good Friday and bank holidays out of the period, so a notice served on a Monday against a deadline that fell on the Saturday is two days late. And a notice that names a sum but no basis is open to the same challenge. The money argument is only the second argument. The notice argument comes first, and it is the one most subcontractors never make.

Carrying it in the numbers

A contra-charge you are disputing is still a risk until it is withdrawn, and the honest way to carry it is as a provision against cost in the monthly cost value reconciliation, not as a reduction in value: the value of the work is what it is, and the contra-charge is a liability you may or may not have. Carrying it that way keeps the margin figure honest without conceding the claim, and it means the provision comes back into margin on the day the charge is withdrawn, which is the day you will have earned it.

How VariationFlow handles it

Every payment cycle in VariationFlow carries the payer’s notice and the pay less notice as dated entries, and the engine tests each against the contract’s own periods and the Scheme’s, reckoned under section 116 for the region the site is in. A pay less notice recorded after the prescribed period is flagged as a possible nullity, with the notified sum shown as payable in full, so the notice question is asked before the merits. The variation register and the daywork lines behind it hold the evidence that answers most contra-charges, and the CVR carries a disputed one as a provision rather than a loss.

This guide is general information rather than legal advice. Whether a particular deduction is recoverable turns on your own sub-contract’s set-off terms and on the facts, and a contra-charge of any size is worth an hour with a construction solicitor or a claims consultant before it is paid or conceded.