Accountants for Construction Companies

When CIS goes wrong on your sites, HMRC does not chase your subcontractors. It chases you.

If a subbie was never verified and you took 20% off when it should have been 30%, the missing 10% is yours to pay. You have already paid that money out once, to the subcontractor, and now you pay it again to HMRC. On a job with fifteen trades on it, that adds up fast, and it is entirely avoidable.

The contractor duties, in the order they bite

Verify every subcontractor before you pay them the first time. Verification is what tells you the rate: 20% for a registered subcontractor HMRC can match, 30% where they cannot, 0% where the subcontractor holds gross payment status. Guessing the rate is not an option, and neither is verifying afterwards.

File the monthly return by the 19th. One day late is £100, and it climbs from there. If you paid no subcontractors that month you still have to tell HMRC, because a missing return and a nil return are treated very differently.

Get the statements out. Every subcontractor you deducted from is entitled to a payment and deduction statement. Missing statements are usually what turns a routine HMRC enquiry into a long one, because it looks like the deductions were never properly run.

Split labour and materials properly. You deduct on labour, not on materials, but only where the materials figure is genuine and evidenced. If a subcontractor’s invoice says “materials £4,000” with nothing behind it and you accept it, HMRC can treat the whole payment as labour and charge you the deduction on all of it.

Retentions run in both directions

Your client holds retention against you. You hold retention against your subcontractors. Most firms we take on are tracking the first one badly and the second one not at all.

Money held for twelve or twenty-four months on a job you finished last year is still your money. It is often the largest asset in the business that nobody is watching, and release dates go past without anyone raising the invoice.

Profit that has not happened yet

Long contracts distort your reported numbers. Work done sits in work in progress until it is certified. Applications go in before certificates come back. Costs land in one month and the income lands in another.

So the management accounts show a margin the bank balance does not support, or a bad month that was actually your best. Getting revenue recognition right on contracts that straddle a year end is what separates running the business on numbers from running it on feel.

Gross payment status

Hold it and contractors above you pay you in full, with nothing sitting at HMRC waiting to be reclaimed. On £3m of turnover that is a serious amount of working capital staying in your account instead of theirs.

The risk is losing it. Status depends on your compliance record, so a run of late returns or late PAYE payments can cost you the thing that funds your cash flow. We watch the deadlines with that consequence in mind.

Group structures

Plenty of firms your size are still running everything through one company. The trade, the yard, the plant, the property and years of retained profit, all sitting in the entity that signs the contracts and carries the risk.

A holding company above the trading company lets profit move up and out of the contracting risk. Property can sit separately from the entity that gets sued, and a second trade gets somewhere of its own to live. There are tax and stamp duty points to work through before anything moves, and it does not suit every business. We do this work, and we will tell you if it is not worth doing.

What we do

CIS end to end. Verification, deductions, returns filed by the 19th, statements issued, year end reconciled against your payroll and your accounts.

Gross payment status. Checking whether you qualify, applying, and protecting it once you have it.

Retention tracking on both sides, with release dates diarised so nothing goes uninvoiced.

Contract and job reporting so you can see margin by job and by contract type rather than one figure for the year.

Cash flow planning built around applications, certificates, retentions and the gap between doing work and being paid.

Group structure advice where the business has outgrown a single company.

Everything else you would expect as well. Year end accounts, corporation tax, VAT, payroll and self assessment.

Who we work with

UK construction limited companies turning over between £500,000 and £5 million. Main contractors, principal contractors and larger subcontractors.

Everything runs on cloud accounting, so we work with firms anywhere in the country.

Common questions

What happens if I pay a subcontractor without verifying them?
You should deduct at 30%. If you deduct less, HMRC can recover the difference from you, and interest and penalties can follow.

Do I have to file a CIS return in a month when I paid no subcontractors?
Yes, as a nil return, unless you have told HMRC the scheme is inactive. Silence gets treated as a missed return.

Can HMRC really make me pay a deduction I never took?
Yes. There is a relief route where you can show you took reasonable care and the subcontractor has already paid the tax, but it is not automatic and it is worth avoiding entirely.

We are paid on applications and certificates. When is the income recognised?
On the work done, not on the certificate date. That is why WIP and accrued income matter on your balance sheet.

Is a holding company worth it at our size?
Sometimes. It depends on how much profit you are retaining and whether the trade carries risk you want kept away from the cash. We look at it properly rather than selling it as standard.

Book a call and we will review your last three CIS returns, your retention position and your work in progress, and tell you what your accounts are currently getting wrong.

Book a call