A payment notice is the written notice a payer gives, under the Construction Act, to say what it considers due on an Interim Payment and how that sum is calculated. It must be issued no later than five days after the payment due date. It can state a nil sum. If it is late or missing, the payee may be able to serve its own notice, and the figure in that notice can become the amount payable.
Worked example
A Subcontractor submits an application for payment of £42,000 on the 25th, and the contract makes the 28th the due date. The Main Contractor's QS values the work at £38,400 gross, takes off 5% Retention and the previous payment, and issues a payment notice by the 2nd, within the five days.
| Item | £ |
|---|---|
| Gross Valuation to date | 38,400 |
| Less retention at 5% | (1,920) |
| Less previously paid | (20,000) |
| Sum due in the notice | 16,480 |
The notice shows the calculation, so the subcontractor can see why £16,480 is due and not the £42,000 applied for.
What it must say
The notice must state the sum the payer considers due at the due date and the basis on which it was calculated. The basis can be the valuation, the schedule or the certificate attached to it. Vague notices invite Adjudication, so the breakdown matters as much as the total.
Payment notices in the cash cycle
The payment notice sits between the application for payment and the money leaving the bank. Late notices are a common cause of disputes, mostly because the QS valued the work on time and nobody sent the notice. Build the notice date into the valuation timetable on every Subcontract, working back from the due date in each contract, since these dates can differ between subcontracts.
If the payer wants to pay less than the notified sum, it has to serve a Pay Less Notice before the final date for payment. Without one, the payment notice figure is what it owes.
Related terms
Pay Less Notice, Construction Act, Payment Application, Interim Payment, Retention, Adjudication.
Planyard's JCT payment application workflow records the application, your valuation and the amount due on each subcontract, so the figures for the notice are in one place.
