A construction accountant does everything a normal accountant does, and then about six more things that only exist in construction. CIS every month. The VAT reverse charge on nearly every invoice. Retentions. Applications for payment. Work in progress. Knowing which jobs made money while the job is still running.
None of that appears in a general practice. It is why a good accountant outside construction can still get your numbers wrong.
What makes construction different
Most businesses sell a thing, get paid, and book the sale. Construction does not work like that.
A job runs for months. You buy materials before you invoice. You apply for payment rather than issuing a normal invoice, and the customer decides what they will certify. Part of what they certify gets held back as retention for a year or more. Meanwhile you are paying subcontractors weekly and HMRC is taking 20% off your own invoices at source.
So the money going out and the money coming in are on completely different timetables, and your bank balance tells you almost nothing about whether the business is doing well.
CIS, every single month
If you pay subcontractors, a return goes to HMRC by the 19th of every month and the deductions go over by the 22nd. Every subcontractor needs verifying before the first payment and a statement within 14 days of each tax month end.
The deduction comes off labour, not materials, and getting that split wrong is the single most common error we correct on new clients. Under deduct and HMRC comes to you for the difference, after you have already paid the money to the subcontractor.
On the other side, the CIS taken off your own invoices has to be reconciled and claimed back. A limited company does that monthly through the payroll. A sole trader does it once a year through Self Assessment. We cover both in getting your CIS deductions back.
VAT, and the reverse charge
Since March 2021, most invoices between VAT registered construction businesses carry no VAT at all. The customer accounts for it instead.
Three conditions have to be met, there is an end user exception that has to be notified in writing, and it does not apply to zero rated work. Getting it wrong in either direction is expensive, and a lot of firms have been getting it wrong quietly for years.
It also changed your cash flow permanently. You used to hold your customer’s VAT for up to three months. Now you never see it.
Knowing which jobs actually made money
This is the part most firms are missing, and it is the part that changes decisions.
Annual accounts tell you the business made money last year. They do not tell you which jobs did. A construction business can have a good year on paper while losing money on a third of its work, and never find out, because the profitable jobs cover it up.
Doing it properly means labour, materials, plant and variations allocated to each job, with overheads apportioned rather than ignored. Then a number per job while the job is still running.
By the time an annual set of accounts tells you a job lost money, you have usually quoted three more the same way.
Work in progress and retentions
Two things that general accountants routinely get wrong on construction accounts.
Work in progress is work you have done and not yet invoiced. It is an asset. Leave it out and your accounts understate the business, which matters most at exactly the moment you need them to look right, which is when a lender or a surety is reading them.
Retention is money you have earned that somebody is holding. It should sit on the balance sheet and it should be chased. Treated as a write off, it quietly becomes one.
Cash flow that means something
A cash flow forecast built on invoice dates is useless in construction, because invoice dates are not payment dates.
A useful one runs off applications, certification dates, actual payment behaviour by customer, retention release dates, and the CIS and VAT position. That is more work to build and it is the only version worth having.
Payroll, and the line between employed and self employed
Most construction businesses run both. Some people on the payroll, some on CIS, and the split is rarely as clean as the paperwork says.
Every monthly CIS return asks you to declare that nobody on it should be an employee. If somebody works only for you, on your hours, with your equipment, under your supervision, HMRC’s view is that they are employed, whatever the invoice says. When they take that view they come to you for the PAYE and both sides of National Insurance, plus penalties.
Getting the line right in advance is a lot cheaper than arguing about it afterwards.
Management accounts that arrive in time to matter
Statutory accounts are a record. Management accounts are a decision.
In construction the useful monthly pack is short. Where each live job sits against its budget, the cash position with retentions and CIS shown separately, the VAT and PAYE coming due, and what has been applied for but not certified.
Four pages, in the first week of the month. Not forty pages in six weeks.
Working with the rest of the team
On anything of size you are not the only one holding numbers. The quantity surveyor has valuations and variations. The contracts manager knows what has been agreed on site and not written down.
An accountant who never speaks to either is working from your bookkeeping alone, which is always the last place a variation shows up. The gap between what the QS has valued and what has been invoiced is where money goes missing.
Compliance, and why the deadlines are worth more than they look
Corporation tax, Self Assessment, VAT, PAYE, CIS and Companies House filings all have their own dates.
In construction there is a second reason to hit them. Gross payment status is tested on twelve months of clean compliance, and losing it means 20% comes off every invoice again. One late PAYE payment can cost you that.
So filing on time stops being an admin task and becomes a cash flow control.
What changes as the business grows
A sole trader subcontractor needs CIS reclaimed properly and a tax return that does not overpay.
A limited company turning over £500,000 to £5 million needs monthly CIS, payroll, job level numbers, and management accounts that arrive quickly enough to act on.
Above that, the questions change again. Group structures, gross payment status, bonding and surety requirements, and how to hold property separately from trade.
What to ask before you hire one
Most of these get a vague answer from a general practice, which tells you what you need to know.
- How many CIS returns do you file a month?
- How do you treat retention on the balance sheet?
- Will I get job level profitability, and how often?
- How do you handle the reverse charge when a customer claims to be an end user?
- When do my management accounts arrive after the month end?
The last one matters more than it sounds. Numbers that arrive six weeks late are history. Numbers that arrive in the first week of the month are a decision.
Where we fit
Construction is the only sector we work in. We handle CIS monthly, treat the VAT correctly, produce job level numbers you can actually read, and get the accounts in before the deadline rather than on it.
Have a look at what we do and the 45 trades we work with, or book a call.