Accountants for construction firms and trades
CIS deducts 20% from your labour before you are paid, the reverse charge means you no longer hold the VAT, and the main contractor holds back 5% as retention. We file your CIS returns, apply for gross payment status, track retentions and cost each job.
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£180,000 of labour through CIS
A subcontractor invoicing £180,000 of labour plus £60,000 of materials in a year, registered for CIS.
The £36,000 is held by HMRC for an average of six months, about £18,000 of working capital tied up. With gross payment status the same firm is paid in full and pays its own tax on the normal dates.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. This is an example and your figures will differ.
Every month under CIS
A CIS return is due every month, including a nil return when nobody was paid. The penalty for a late return starts at £100.
CIS return to HMRC, whether or not you paid a subcontractor that month.
PAYE, NI and CIS deductions paid over.
CIS, retentions and the reverse charge
In construction, CIS deductions are taken from your labour before you are paid, the main contractor holds back a retention for months after the job is signed off, and under the domestic reverse charge the customer accounts for the VAT you used to hold for a quarter.
Together these can leave a profitable firm short of cash. Two things help most: costing each job so you know which work makes money, and getting gross payment status so CIS is no longer deducted from your labour.
The Construction Industry Scheme
A contractor deducts 20% from a registered subcontractor, 30% from an unregistered one, and nothing at all from one with gross payment status. Deductions come off labour only, never off materials, and a return is due to HMRC by the 19th of each month whether or not you paid anybody.
The domestic reverse charge for VAT
On most construction services between VAT-registered businesses in the CIS chain, you do not charge VAT — the customer accounts for it. It reduced many subcontractors’ cash when it came in, because they had been using the VAT as working capital before they paid it over. The fix is a separate account and a standing transfer into it.
Retentions
Money held back for months against defects is still income when the work is done, so you can be taxed on cash you have not seen. It becomes a bad debt if the main contractor goes under. Retentions need tracking separately from your ordinary debtors.
Pricing a job against your actual costs
The most common problem we see is a day rate set three years ago that no longer covers wage inflation, materials and the unbilled hours. Job-level costing shows which work is making money.
Am I actually making money on each job?
Only job-level costing will tell you, and most trades businesses do not have it. A profit and loss shows whether the year was good; it does not show that the extension you quoted at £42,000 cost £39,000 to deliver because of two variations nobody invoiced. Tracking labour, materials, plant and subcontractor cost against each job is what turns a busy year into a profitable one. It is also what lets you quote the next job from evidence rather than instinct. See management accounts.
Vans, tools and travel
Vans and plant
A van gets better treatment than a car for both capital allowances and benefit in kind, and the classification of a crew cab changes the tax. Plant and equipment usually qualify for the annual investment allowance in full, so the timing of a purchase around your year end matters.
Tools and workwear
Tools, safety equipment, protective clothing and branded workwear are allowable; everyday clothing is not.
Travel
Journeys from home to a site that has become your normal place of work count as commuting, and a long-running site can quietly become your normal place of work. Keep a mileage log with dates, sites and purpose.
Construction tax dates
Every VAT quarter
Return and payment, one month and seven days after the period ends.
At practical completion
Retention falls due and needs chasing.
Your year end
Accounts, corporation tax or Self Assessment, and the capital allowances claim.
Annually
Gross payment status is reviewed. Late filings can lose it.
Source: gov.uk CIS, VAT domestic reverse charge and PAYE guidance, checked July 2026. See key tax dates and the calculators.
What we do for construction firms
CIS filed monthly
Contractor returns by the 19th, subcontractor deductions tracked and set off, verification handled before you pay anybody.
Gross payment status
The application, and the compliance needed to keep it.
Retentions tracked separately
So you know what is owed, what is overdue and what has become a bad debt.
Job costing
Labour, materials, plant and the unbilled hours costed against each job.
The reverse charge handled
Invoices set up correctly and a VAT position that reflects it before the first return.
Vans and plant
Capital allowances claimed properly and purchases timed around your year end.
Frequently asked questions
How much does it cost?
Accounts and tax start at £29 + VAT a month for a sole trader and £49 + VAT for a limited company, the fee rises with turnover, and the instant quote shows yours in four questions. For construction the drivers are the number of subcontractors under CIS, whether you are VAT registered, payroll headcount, and how the paperwork arrives — a phone full of photographed receipts is a very different job from a carrier bag in December. Construction firms are priced on the same basis as every other client. FreeAgent is included, worth up to £330 a year, and questions by phone are covered by the monthly fee.
How does the domestic reverse charge work?
For most construction services between VAT-registered businesses inside the CIS chain, the customer accounts for the VAT rather than the supplier charging it. As a subcontractor you invoice without VAT and state that the reverse charge applies; as a contractor you account for it on your own return. It does not apply to end users, to supplies of materials alone, or where the customer is not VAT and CIS registered. The cash effect was significant for subcontractors, because VAT no longer sits in the account between quarters — money some businesses had been using as working capital.
Are my subcontractors genuinely self-employed?
That depends on the reality of the arrangement. An invoice or a UTR does not settle it. The tests are the familiar ones: control over how and when the work is done, whether they can send a substitute, who provides materials and plant, and whether they carry financial risk on their own work. If HMRC reclassifies someone as an employee, the contractor picks up the PAYE and National Insurance that should have been deducted, plus interest and penalties.
How do I stop retentions wrecking my cashflow?
By treating them as a debtor with a date rather than money that turns up eventually. Retention is typically held until practical completion and then partly until the defects period ends, which can be a year or more after you did the work — so it belongs in a forecast, tracked job by job, with a chasing process attached. The other half of the fix is timing: materials bought up front against staged payments received in arrears creates a funding gap on every job. That gap is predictable, which means it can be planned for or financed deliberately.
Get a quote
Answer four questions to see the monthly fee. The full proposal is emailed to you.
Call or WhatsApp 07476 989568 or email hello@buzzaccounting.co.uk
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