Moving From Domestic to Commercial Work: What Changes

‍‌​‌‌‌​‌‌‌​​‌​​‌​​‌​​​‌​‌‌‌‌‌​‌​‍Moving from Mrs Jones' kitchen to commercial or council work is like moving from five-a-side to a proper league -- same game, but the rules, paperwork and money flow are very different.

8.20.1 Contracts: handshakes vs paperwork

Domestic

• Often based on quotes, emails and short T&Cs, sometimes just a handshake.
• Little or no formal contract structure -- you're relying on trust and small-claims court if it goes wrong.

Commercial/public

• Formal contracts -- JCT Minor Works, JCT Intermediate, NEC, or the main contractor's own subcontract conditions.
• Clear sections on: scope, programme, variations, payment terms, retention, LADs, defects and dispute procedures.
• LADs (liquidated damages) = a pre-agreed amount you pay per day or per week if your work is late. On commercial jobs these can be eye-watering -- hundreds or thousands per day -- and they're enforceable if they're a genuine pre-estimate of loss. If you've never seen one before, don't sign without understanding your exposure.
• CDM 2015 duties are set out formally -- client, principal designer, principal contractor, contractor.

You need to be comfortable reading and pushing back on contract clauses (or paying someone once to walk you through what they mean).

8.20.2 Insurance: limits jump up

Domestic-only work

• Many small trades run with £1m-£2m public liability; sometimes no PI (professional indemnity) if they don't do design.

Commercial/public

• £5m public liability is the standard minimum for most commercial sites, schools, healthcare, business parks and housing developments.
• Councils and higher-risk sites often demand £10m PL.
• Professional indemnity is often contractually required if you touch design/specification or give technical advice.
• Employers' liability is a must if you have staff, regardless of sector.

You usually don't need a separate "commercial-only" policy -- you need one proper policy that explicitly covers commercial/public work at the right limits.

8.20.3 CDM and health & safety: same law, more visible

CDM 2015 applies to both domestic and commercial jobs, but the client duties are treated differently.

Domestic

• CDM still applies, but client duties often get pushed onto you or the principal contractor by default.
• Less formal paperwork (on small jobs) -- but you're still legally meant to plan, manage and monitor health and safety.

Commercial/public

• The client has active CDM duties and will expect:
  • Proper RAMS (risk assessments and method statements).
  • A construction phase plan.
  • Evidence of training and competence (CSCS, SSSTS/SMSTS for supervisors).
  • Inductions, toolbox talks, permits to work, site rules.

Day to day, that means:

• More time on paperwork and site inductions.
• More oversight from safety officers and auditors.
• Less tolerance for "we've always done it this way."

8.20.4 Payment terms, retention and cash-flow shock

Domestic

• Deposits plus staged payments, or payment on completion -- money in your account within days if you push.
• No formal retentions; the "defects period" is usually informal goodwill.

Commercial/public

• Payment on 30, 45 or 60 days from valuation/certification is common; 90 days in reality isn't unusual with some main contractors.
• Retention -- typically 3-5% taken off each invoice:
  • Often half released at practical completion,
  • Remainder released at the end of a defects period (often 6-12 months after completion).
• Retention bonds and deposit schemes: some subcontracts now offer alternatives to having cash held -- a retention bond (you pay a small premium to a surety instead of losing cash) or a retention deposit scheme (cash held in a protected account). Always worth asking about, since it directly reduces the cashflow hit.

That means:

• You may need to fund wages, materials and overheads for 2-3 months before you see a penny, and part of that is held back again as retention.
• One slow-paying client can choke your cash-flow if you're not ready.

Public sector prompt payment

Public bodies are supposed to pay within 30 days and pass that obligation down the supply chain. The Public Contracts Regulations 2015 and the Procurement Act 2023 both address this. If a council or housing association is regularly paying you at 60-90 days, that may be a breach of their own procurement rules -- you can raise it, and they should take it seriously.

You shouldn't even think about jumping up without

• A buffer (overdraft, savings, or agreed finance).
• Tight cost tracking and invoicing.
• The discipline to chase and escalate late payments under the contract terms.

8.20.5 Pay when paid -- know your rights

If a main contractor tries to put a "pay when paid" clause in your subcontract -- meaning they only pay you when the client pays them -- know this: pay-when-paid clauses are illegal under the Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act"), except in very narrow insolvency situations.

You have a statutory right to be paid at intervals and within defined timescales regardless of whether the main contractor has been paid. If someone puts this in a subcontract, they're either hoping you don't know the law or they haven't updated their terms in 25 years. Either way, don't accept it.

See guide 1.10 for the full detail.

8.20.6 VAT reverse charge

Moving into commercial construction work triggers a significant cashflow difference most domestic-only trades don't see coming.

Under the domestic reverse charge for VAT (which applies to most CIS-registered subcontractor payments in the construction supply chain):

• You don't charge VAT on your invoices to the main contractor -- they account for it themselves.
• That means you're not collecting VAT from your customer that you'd normally use to smooth cashflow before paying it to HMRC.
• At the same time, you're still paying VAT on your materials and other inputs.

The result: if you're used to having VAT in your account for a few weeks before it's due, that float disappears. Plan for it.

See guide 5.5 for the full mechanics.

8.20.7 Pricing: prelims, overheads & profit, dayworks

Domestic

• Often priced as a lump sum: "job for £X", with a rough internal split between labour, materials and a bit for overheads and profit.
• Prelims (welfare, scaffold, security, management time) bundled in without being spelled out.

Commercial/public

• Tenders expect to see:
  • Preliminaries -- site setup, welfare, supervision, plant, scaffolding, insurances, testing.
  • Overheads & profit as a separate line or percentage.
  • Detailed build-ups per activity, often against a schedule of rates.
  • Clear daywork rates for extra works -- labour per hour by grade, plant and materials mark-up.

You're competing against firms who know their true costs and overheads. If you price like you do domestics, you can easily under-cook your prelims and end up working for free.

8.20.8 Quality, specs, snagging and defects periods

Domestic

• Spec: usually "new kitchen", "new bathroom", maybe some brand names and a finish level.
• Snagging is a walk-round with the homeowner; you fix a few bits, everyone's happy.

Commercial/public

• Detailed specifications (NBS or similar) -- exact products, standards, test requirements.
• Work inspected by:
  • Clerk of works,
  • Contract administrator,
  • Main contractor's QS/superintendent.
• Defects liability period is written into the contract -- often 6-12 months after practical completion where you must return and put defects right, then final retention is released.

You need:

• Tighter internal QA -- checklists, test records, photos, O&M info (operation and maintenance).
• To be comfortable with formal snag lists and the idea that "job's finished" is a defined point, not whenever you and the client agree over a brew.

8.20.9 Working under a main contractor vs direct to homeowner

Domestic

• You're in direct control -- you quote the client, agree changes, and get paid by the person you're speaking to.

Commercial/public

• Common model is you as a subcontractor to a main contractor.
• Relationship changes:
  • You answer to their site manager and QS, not the end client.
  • Variations must be agreed via their paperwork (site instructions, CVIs, change orders), not just a quick chat.
  • Their subcontract terms can include harsh clauses -- long payment terms, broad indemnities, uncapped damages.

Your T&Cs don't apply -- theirs do. You need to:

• Read their subcontract terms before signing.
• Watch for killer clauses (uncapped damages, design liability you haven't priced for, unfair retentions).
• Make sure you can still make your margin after prelims, retentions and their payment behaviour.

8.20.10 Qualifications, accreditations and paperwork step-up

Domestic

• Many small jobs run on "experience and word of mouth" plus statutory qualifications (Gas Safe, NICEIC, etc.).

Commercial/public

You'll see more demands for:

• CSCS cards for all site operatives.
• Supervisor tickets -- SSSTS/SMSTS for anyone running gangs.
• Evidence of training -- asbestos awareness, manual handling, work at height, abrasive wheels, etc.
• Third-party H&S schemes -- CHAS, Constructionline, SafeContractor, SMAS, often used as a pre-qualification filter.
  • Budget for these -- they carry annual fees, typically £200-£600+ depending on the scheme and your company size. Some clients insist on specific ones, so check what your target clients want before paying for everything.

Proper documentation

• RAMS for each package of work.
• COSHH assessments for hazardous materials.
• Site induction and toolbox talk records.
• Permit systems (hot work, confined spaces, roof access).

It's a jump in admin. Worth it if the job values justify it, a nightmare if you're still operating like a one-man band with no office time.

8.20.11 PQQ / selection questionnaires for public sector

For public sector work, you'll usually face a pre-qualification questionnaire (PQQ) or selection questionnaire (SQ) before you even get to tender.

What they typically ask for

• Company turnover (usually last 2-3 years) -- they want to see you can handle the contract value.
• Insurance certificates at the right levels.
• Health and safety policy and evidence of how you manage it.
• Environmental policy (even a basic one).
• Equal opportunities / modern slavery statements.
• References from previous similar work.
• CSCS/training records for your workforce.

Tips

• Don't be put off by the first one -- they look intimidating but most are asking the same basic questions.
• Some are standard (e.g. PAS 91 for construction) so once you've done one, the next is easier.
• Keep a "PQQ pack" with all your standard documents ready to go: insurance certs, policy documents, references, training records, company accounts.
• If you can't demonstrate turnover at the level they want, you won't get through -- don't waste time on contracts that are clearly too big for where you are right now.

8.20.12 Revenue opportunity vs operational burden -- when to jump

Upside

• Job values are often higher -- larger projects, framework agreements, repeat work with commercial clients.
• Better pipeline if you get in with a good main contractor, FM firm or public-sector client.
• You build a track record that can support growth and better margins down the line.

Downside

• Cash-flow stretch from long payment terms and retentions.
• More overhead in admin, H&S, supervision and insurance.
• Greater risk of getting squeezed by main contractors on price and variations.

You're ready to move when

• You've got cash reserves or finance to handle 60-90 day payment cycles and retentions.
• You're comfortable producing basic RAMS and H&S paperwork.
• Your insurances are at the right levels and explicitly cover commercial work.
• You understand the VAT reverse charge and have planned for the cashflow impact.
• You're prepared to say no to bad subcontract terms, not just grab any logo job.

8.20.13 Getting your first commercial/public job

Practical routes in

Start as a subbie to a small or mid-sized main contractor:

• Ask builders you know who've already gone commercial if they need reliable trades for packages.
• When you're on a job with a main contractor, do your bit well, turn up, and make their life easy -- then ask to be added to their subcontractor list.

Go via frameworks and smaller public-sector clients:

• Local schools, housing associations, parish councils, GP surgeries -- often use local contractors for small jobs.
• They may want evidence of insurance, H&S policy and references, but not full corporate machinery.

Tidy your basics first:

• Decent insurance limits.
• Simple H&S policy and a couple of RAMS templates.
• Bank account and invoicing that can handle staged payments, valuations and retentions.

Start small -- one or two modest commercial jobs alongside your domestic work -- and see how your cash-flow and paperwork cope before you try to switch everything over.

What to do next

If you're thinking about stepping up:

• Talk to your broker about getting PL to at least £5m and adding PI if you do any design/spec.
• Pick one or two local commercial clients (schools, small developers, housing associations) and ask what they expect from contractors in terms of insurance, H&S and paperwork.
• Build a basic RAMS pack and tighten your cost tracking so you actually know your prelims, overheads and profit on each job.
• Read guide 5.5 on the VAT reverse charge before you invoice your first commercial job.
• Budget for accreditation fees (CHAS, Constructionline etc.) as a business cost, not an afterthought.

Sources

• Construction (Design and Management) Regulations 2015 -- legislation.gov.uk/uksi/2015/51/contents/made -- CDM duties for clients, designers and contractors.
• Housing Grants, Construction and Regeneration Act 1996 -- legislation.gov.uk/ukpga/1996/53/contents -- the Construction Act: payment terms, adjudication, and the ban on pay-when-paid.
• Public Contracts Regulations 2015 -- legislation.gov.uk/uksi/2015/102/contents/made -- procurement rules for public sector including 30-day payment obligations.
• Procurement Act 2023 -- legislation.gov.uk/ukpga/2023/54/contents/enacted -- updated public procurement framework.
• Value Added Tax Act 1994 and HMRC guidance on the domestic reverse charge for building and construction services.
• JCT and NEC contract guidance -- published guides on contract forms and subcontract conditions.
• CHAS, Constructionline, SafeContractor -- published requirements for pre-qualification in construction.

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