Is retention the same as a performance bond?

No. Retention is cash held back from progress invoices. A performance bond is a separate financial guarantee issued by an insurer or bank. Some contracts require both.

Can I refuse to accept retention?

You can negotiate it out of the contract — smaller residential contractors often do. On commercial or public work it's generally non-negotiable and priced into the tender.

Does retention apply to subcontractor invoices too?

Almost always yes — the main contractor passes the retention down. If you're a subcontractor, check your sub-contract for the retention percentage and release trigger.

How do I invoice VAT on retention?

VAT is due on the gross progress-invoice value when the invoice is issued, not on the retention release. The release itself is a collection, not a new supply.

What's a typical defects period?

6-12 months in the UK, 12 months in Australia, varies by contract in the US and EU. During this period the contractor fixes defects; at the end, the second half of retention releases.

Retention & Holdback Invoicing Explained (Construction & Trades)

Retention (US: holdback) is standard on construction progress invoices. Here's how it's calculated, how to show it on the invoice, and how to invoice for its release.