CIS filed monthly
Contractor returns by the 19th, subcontractor deductions tracked and set off, verification handled before you pay anybody.
Construction and trades
Paid late, taxed early, and holding somebody else's retention
CIS takes a fifth of your labour before you see it, the reverse charge took the VAT float away, and the main contractor is still holding 5%. That is a cash problem, not a bookkeeping one — and it is fixable.
What you get
- CIS returns filed every month
- Gross payment status chased
- Retentions tracked separately
- Job-level costing so you can price properly
- Reverse charge set up correctly
- One fixed monthly fee
The numbers that decide it
Four figures worth knowing by heart
Four numbers govern a construction year. The first one is money you have earned but cannot spend.
20% / 30%CIS deducted, registered or not
19thOf each month, the CIS return is due
0%VAT charged under the domestic reverse charge
£90,000VAT registration, on rolling turnover
2026/27 figures. See key tax dates and the calculators for the full picture.
Your year
The only trade with a monthly return whether or not you traded
CIS does not have a quiet season. A nil return still has to be filed, and the penalty for forgetting starts at £100.
19th monthlyCIS return to HMRC, whether or not you paid a subcontractor that month.
22nd monthlyPAYE, NI and CIS deductions paid over.
Every VAT quarterReturn and payment, one month and seven days after the period ends.
At practical completionRetention falls due — and needs chasing, because it will not arrive on its own.
Your year endAccounts, corporation tax or Self Assessment, and the capital allowances claim.
AnnuallyGross payment status is reviewed. Late filings are what lose it.
Source: gov.uk CIS, VAT domestic reverse charge and PAYE guidance, checked July 2026.
The thing that makes it different
You get paid late and taxed early
Construction is the only trade where the tax system takes money off you before you have been paid, and the customer holds another slice back for months after the job is signed off. CIS deductions come off at source; retentions sit with the main contractor; and the VAT you used to hold for a quarter now goes straight to the customer under the reverse charge.
Put those three together and a profitable firm can be permanently short of cash. That is not a bookkeeping problem and it will not be fixed by filing earlier. It is a working-capital problem, and the way out of it is knowing which jobs actually make money and getting gross payment status so HMRC stops holding a fifth of your labour.
The detail that decides it
What actually moves the numbers in construction
Construction has more tax machinery bolted onto it than almost any other trade. These are the five that decide whether your year is straightforward or a mess.
- 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 broke a lot of cash flows when it came in, because subcontractors had been living on the VAT before they paid it over. The fix is a separate account and a standing transfer, not a bigger overdraft.
- 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 also quietly becomes a bad debt when a main contractor goes under. Both need tracking separately from your ordinary debtors, and almost nobody does it.
- Vans, tools and plant
- A van is treated far more kindly than a car for both capital allowances and benefit in kind, and getting the classification right on a crew cab is worth real money. Plant and equipment usually qualify for the annual investment allowance in full, so the timing of a purchase around your year end matters.
- Pricing a job against your actual costs
- The most common problem we see is not tax at all. It is a day rate set three years ago that no longer covers wage inflation, materials and the unbilled hours. Job-level costing tells you which work is making money, and in most trades it is less of it than the owner thinks.
Gross payment status, in pounds
What the 20% deduction is actually costing you
£180,000 of labour through CIS
A subcontractor invoicing £180,000 of labour plus £60,000 of materials in a year, registered for CIS but without gross payment status.
- Labour invoiced
- £180,000
- CIS deducted at 20% — labour only, not materials
- −£36,000
- Materials invoiced — no deduction
- £60,000
- Cash actually received across the year
- £204,000
- Held by HMRC until your return is filed and set off
- £36,000
- Working capital tied up, on average
- ~£18,000
Money you have earned, sitting with HMRC for an average of six months. With gross payment status the same firm is paid in full and settles its own tax on the normal dates. It is the single most valuable piece of admin in construction and it is worth chasing hard.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. An example, not advice — your figures will differ.
What we do about it
Built round how the trade actually pays
Gross payment status
The application, and keeping you compliant enough to hold on to it once you have it.
Retentions tracked separately
So you know what is owed, what is overdue and what has quietly become a bad debt.
Job costing
Labour, materials, plant and the unbilled hours against each job, so pricing is a decision rather than a habit.
The reverse charge handled
Invoices set up correctly and a VAT position that reflects it, rather than a nasty surprise at the first return.
Vans and plant
Capital allowances claimed properly and purchases timed around your year end.
Questions
What people in this trade ask us
How much does it cost?
You get a fixed monthly figure in writing after a 30-minute discovery call. 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. There is no sector premium. FreeAgent is included, worth up to £330 a year, and there is no hourly charge for ringing up with a question mid-job.
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, not on whether they invoice you or hold a UTR. 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.
Can I claim for my van, tools and travel?
Vans and plant generally qualify for capital allowances, and a van is treated far more favourably than a car both for capital allowances and as a benefit in kind. Tools, safety equipment, protective clothing and branded workwear are allowable; everyday clothing is not. Travel is the area that generates most disputes: journeys from home to a site that has become your normal place of work are commuting, not business travel, and a long-running site can quietly become exactly that. Keep a mileage log with dates, sites and purpose.
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.
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