The Scheme: payments: 'contras' and 'set-offs'
|CISR15600||Action guide contents|
You may encounter the following terms in certain situations where a contractor withholds part of a contract payment.
A ‘contra’ is a charge for goods or services supplied to the subcontractor. For example, on a contract worth £200, the contractor gives the subcontractor some surplus materials and restricts payment by £50.
A ‘contra’ does not reduce the ‘payment’ from which the deduction may have to be made. It is in effect a ‘payment’ by the contractor to the subcontractor. In the example given, and assuming that the materials are not used in carrying out the construction operations, the deduction should be calculated on the full contract value of £200.
A ‘set-off’ arises when a contractor does not make a payment because the contractor believes there has been a breach of contract. For example, £400 of a £2,000 contract is withheld because the work is below standard.
The ‘set-off’ reduces the ‘payment’ from which a deduction may have to be made. It is not a payment by the contractor to the subcontractor. In the example shown, the deduction should be made from £1,600.