NEC ECS: Applying Delay Damages

I am the MWC and have a subcontractor on an NEC3 Option A subcontract. We are imposing delay damages on the Subcontractor.

Where do we put the delay damages amount? On their next Payment Certificate as a line under their Activity Schedule?

If we did that the value of the Certificate would be around -£150k? Would this be correct? What would happen with VAT?

Delay damages are not Defined Cost and should be added as a ‘below the line item’, after the Price for Work Done to Date calculation (see 3rd bullet at sub-clause 50.2).

Delay damages represent a ‘compensatory’ payment and not a consideration for supplies so they are, therefore, outside the scope of VAT so it is not applied to this amount.

If the payment certificate is a negative amount then you would become the Payee and the Subcontractor the Payer. Payments can go ‘both ways’, as provided by the contract, in accordance with the stated timescales relating to payment ‘due date’ and ‘final date for payment’.