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Retention

Retention: money held back, and why it is not a late payment

The job is finished, the invoice is in, and 5% of it is not coming for six months. That is retention, it is normal in construction, and it is the single most common reason a perfectly healthy business looks like it has a debtor problem.

The thing most people get wrong

An invoice paid short by retention looks exactly like an invoice from a customer who has not finished paying. If you have nowhere to record which it is, the balance reads as overdue, your debtor figures count it, and you end up chasing your biggest customers for money that is not late — which is a conversation that costs more than the retention.

What you need to know

What it is for

It is security against defects. The customer holds back an agreed percentage — commonly 5%, often as 2.5% at practical completion and 2.5% at the end of the defects period — so that if something has to be put right afterwards there is money to do it with. It is contractual. It is not a dispute and it is not a complaint about the work.

Half now, half much later

The first release usually comes at practical completion. The second comes at the end of the defects liability period, which on a domestic or small commercial job is typically six or twelve months later. Those are two different dates, often in two different tax years, and treating them as one is how the second half gets forgotten entirely.

A retention with no date is not late

"Six months after practical completion" is frequently not a date anybody has yet, because practical completion has not happened. An undated retention is not overdue — it is simply not due. Treating unknown as late puts every retention you have ever recorded on the chase list the day it is recorded, and then nobody reads the chase list.

Keeping track of it without a spreadsheet

The thing to be able to answer is: what is held, by whom, and when does each piece fall due. Once it is past its release date it is ordinary money owed and should be chased — but chased as retention, by name, because "your invoice is overdue" is the wrong phone call to make about money a quantity surveyor is sitting on deliberately.

Questions, answered

Is retention a debt?

Not until it is due. Until the release date it is money held under the contract and is not owed to you, which is why it should not appear in your overdue figures. Once the date passes it becomes an ordinary debt and can be chased like any other.

How much retention is normal?

Five per cent of the contract value is the common figure in UK construction, released in two halves. Three per cent appears on larger contracts and ten is unusual and worth questioning. Whatever the number, it should be in the contract before the first invoice rather than appearing on a remittance.

Can I refuse to allow retention?

It is a commercial negotiation, not a legal requirement, so yes in principle — but on housing association and main contractor work it is rarely optional. What is worth negotiating is the length of the defects period and the release dates, which cost the customer nothing and cost you the time value of the money.

What happens if they never release it?

Once a release date has passed the money is an ordinary overdue commercial debt, which means statutory interest and the fixed sum apply the same as on any other late invoice. The practical first step is a statement showing each retention, its release date and the days since — most are forgotten rather than withheld.

Work out your own figure

The arithmetic on this page is free to use without an account — the retention calculator runs the same code the invoices in TaskMyJob do, so what it shows you is what the software would put on the paperwork.

This is general information about how these rules work, not advice about your own affairs. Contracts can say something different, and your accountant knows your situation and this page does not.

See it being done

Step-by-step guides with a short recording of each one, free to read without an account.

Retention held back on a contract

Money the contract keeps until practical completion — recorded, shown to the customer, and never chased as a debt.

Take the money in stages

A deposit, then materials, then the balance — each one its own invoice, always adding up to the quote.

See and chase what you are owed

Who owes you, how long it has been, and who to ring first.

All the guides and videos →

Also worth a look

The other two questions trades ask about getting paid.

CIS deductions

Why a £1,000 invoice is paid at £880, what the deduction is legally taken off, and why the total on the invoice does not change.

When nobody pays

The order to do things in, what a late commercial invoice is legally worth, and the one number that makes most people pay before it goes further.

All advice →

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