How is a construction advance payment recovered?
A mobilisation advance is recovered by deducting an agreed percentage from each later payment certificate until the advance is repaid. Each deduction is capped at the amount still outstanding. Because the advance was invoiced with 5% VAT when received, each recovery reduces the taxable value of the later invoice instead of being taxed again.
The schedule
The contract sets the recovery percentage and when it starts. Each certificate recovers that percentage of the certified value, and the last one recovers only what is left. SupaJack Construct reads what has already been recovered from posted entries, so the final deduction stops exactly at zero.
The guarantee behind it
Clients usually ask for an advance payment guarantee from the contractor's bank, reduced as the advance is recovered. Its face value is a promise, not money moved, so it is recorded as a memorandum rather than posted to the ledger.
Related tools and guides
See the VAT guide for contractors, the interim payments guide, the payment certificate calculator, the retention calculator, the advance recovery calculator and the meaning of retention.
Worked example
A AED 480,000 advance recovered at 10%: certificates of 1,056,000, 960,000, 1,200,000 and 1,440,000 recover 105,600, 96,000, 120,000 and 144,000. The fifth certificate recovers only the AED 14,400 left.
Questions people ask
Is VAT charged twice on the advance?
No; recoveries reduce the taxable value of later invoices.
What if no recovery rate is agreed?
SupaJack Construct refuses to invoice until the rate is recorded.
Can recovery exceed the advance?
No, it is capped at what is outstanding.