Type of Bonds

An Advance Payment Bond is a guarantee, supplied by the Contractor or Sub-Contractor receiving an advance payment from the Employer advancing the payment. It provides that the advanced sum will be returned if the agreement under which the advance was made cannot be fulfilled. They can also be called Advance Payment Guarantees.

A Construction Bond is a guarantee of various formats, most of the variations are outlined on our specific headings, all types of Construction Bonds are designed to offer some form of protection to the employer/beneficiary against any losses and/or damages sustained as a result of the contractor failing to perform its contractual obligations.

To fulfil legal obligations under various statutes a contractor may be required to place a bond in favour of the Environment Agency (EA), for a variety of bespoke purposes that if left unresolved may damage the environment.

Customs and Excise Bonds HMRC Bonds. The posting of a duty deferment bond or movement guarantee with HM Revenue & Customs (HMRC) allows you to import, store and distribute goods prior to payment of customs and excise duty, thereby freeing up your cash flow.

A Materials Offsite Bond is a guarantee, supplied by the Contractor or Sub-Contractor receiving an advance payment from the Employer so they can purchase any materials for the contract, the Bond provides comfort to the Employer that the advanced sum will be returned if the agreement under which the advance was made cannot be fulfilled. They can also be called Advance Payment Guarantees.

A Movement Guarantee Bond is a Customs and Excise Bond. The Movement Guarantee with HM Revenue & Customs (HMRC) allows you to store and distribute goods prior to payment of customs and excise duty, thereby freeing up your cash flow.

NHBC (National House Building Council) is the leading warranty and insurance provider and standards setter for UK house-building for new and newly converted homes. As a non-profit distributing company, it reinvests all income in achieving its primary purpose: improving quality in housebuilding to protect homeowners.

A Construction Performance Bond is a guarantee, typically with a value of 10% of the contract price (though this may vary in some cases). It is designed to offer protection to the employer/ beneficiary against any losses and/or damages sustained as a result of the contractor failing to perform its contractual obligations.

Warehouse-keepers are normally required to provide financial security to HM Revenue & Customs (HMRC) for goods held in duty suspension within their warehouse. The size of the Premises guarantees relates to the potential duty due to HMRC on the warehouses average end of the month stock calculated over a 12-month period, with allowances made for seasonal variations.

Restoration Bond (also known as a reinstatement guarantee) is typically sought for major construction contracts, which may have a detrimental effect on the environment, and a form of Restoration Bond is required to ensure that the landscape is restored following completion of the project. They are used for land fill waste operations, solar energy, wind turbines and quarrying, and may be a pre-requisite of planning permission by the Local Authority.

An Employer usually holds a retention from the Contractor or Sub-Contractor to cover any defects that may arise after the project is completed usually up to 5% of the contract value to Practical Completion and then reducing for a period of up to 12 months of Making Good of Defects. The Contractor or Sub-Contractor must wait for the funds to be returned at the end of the Making Good of Defect period.

Road & Sewer Bonds or Section Agreements are Highways & Sewer Bonds that are required by Local Authority and Water Authority (including the Scottish Irish equivalents) they are to cover the Council or Water Authority if they need to construct/repair the Road or Sewer if the developer fails to do so to their standards. They usually have a value equivalent to the costs of the works determined by the Local Authority or Water Authority concerned. In some cases, the Local Authority (Council) ask for a higher percentage to cover any additional costs they may face (commuted sums). The Water Authority may only ask for 30% of the works. You would need to confirm with the relevant authority the exact Bond value they are expecting prior to applying for the Bond, this is usually at Technical Approval stage.