Groundworks sits inside the Construction Industry Scheme, all of it.
Site preparation, laying foundations, providing access works and drainage are named as construction operations in the legislation. There is no scope argument to be had here.
What makes groundworks awkward is the other thing. You are almost always a contractor and a subcontractor at the same time, on the same job. A main contractor pays you and takes his deduction off the top. You pay plant operators, gangs, hauliers and specialist subbies, and you take a deduction off theirs. The scheme runs through the business in both directions every month, and the paperwork doubles with it.
The materials and labour split is where your cash goes
A CIS deduction is applied to the labour element of your invoice. The direct cost of materials you paid for comes out first, before the deduction is worked out.
That reads like a technicality until you look at an actual groundworks invoice, where materials can be half the value. Concrete, stone, pipe, bedding, membrane, rebar and kerbs are real money that has already left your account.
Send an invoice that says “groundworks to plots 12 to 18, £48,000” and the contractor paying it has nothing to work from. He will apply the deduction to the whole lot, and he is right to. If £24,000 of that was materials, you have just handed HMRC £4,800 of your own working capital to hold onto for a while.
Break the invoice down and that £4,800 stays in your bank. The money is not lost either way. But “not lost” and “in the account this month” are two different things when you are paying a concrete supplier on 30 days.
Two points worth knowing:
- It is the actual cost you paid that comes out. Any mark-up you put on materials sits in the deductible element
- Materials free issued to you by the main contractor are not your materials, because you did not pay for them
Plant with a man on it is inside. Plant on its own is not
Hire of plant with an operator falls inside the scheme. Dry hire, where the machine goes out and somebody else drives it, falls outside.
Most groundworks firms do both without ever thinking about it, and the distinction only surfaces at the worst moment. Either a contractor applies a deduction to a dry hire invoice you raised, or you fail to apply one to an operated hire payment you made. The second is the expensive version, because HMRC goes to the contractor for tax that should have been deducted, and on that invoice the contractor is you.
Muck away, tipping and the costs that are not materials
Getting spoil off site is a real cost with a real invoice behind it, and it is not a material. Tipping charges, landfill tax, grab hire and wagon time sit in the labour element of your invoice as far as the deduction is concerned.
On a big dig that is a serious amount of cash caught up in a deduction it was never meant to fund. Worth deciding before you tender whether muck away is inside your price or billed separately, because that decision changes when you see the money rather than whether you see it.
Gross payment status ends the argument
Hold gross payment status and nobody deducts anything from you. No 20% off the top, no waiting to get it back, no debate about which line on the invoice was stone.
For a groundworks firm the turnover test is the one to look at first, because it is based on turnover excluding materials. Your labour-only figure is a lot lower than the number on the top of your accounts, and firms rule themselves out on the headline turnover without checking.
What we do
CIS in both directions. Verification, deductions, monthly returns filed on time, subcontractor statements out, and the deductions suffered on your own income reclaimed rather than forgotten.
Invoices built to split labour and materials as standard, so the deduction lands on the right number without anybody having to remember.
Job costing across labour, plant, materials and muck away, so you can see margin by job rather than one figure at the year end.
Cash flow forecasting that accounts for retentions and the gap between pouring the concrete and being paid for it.
Plus the ordinary compliance underneath. Plus year end accounts, corporation tax, VAT returns, payroll and self assessment.
Who we work with
UK groundworks and civils limited companies turning over between £500,000 and £5 million. Everything runs on cloud accounting, so where your yard is makes no difference to us.
Common questions
Is groundworks inside CIS?
Yes. Site preparation, foundations, access works and drainage are all named construction operations.
Do I have to register as a contractor as well as a subcontractor?
If you pay gangs, operators or subbies for construction work, yes. Most groundworks firms are registered both ways.
How do I stop CIS being deducted from my materials?
Show the materials cost separately on the invoice. The contractor works the deduction out on what is left.
Is plant hire inside the scheme?
With an operator, yes. Dry hire without an operator, no. If you supply both, invoice them separately.
Can I get gross payment status?
If your turnover excluding materials is over £30,000 (or £100,000 for a company with multiple directors), your tax affairs are up to date, and you run the business through a bank account. We check and apply on your behalf.
Book a call and send us one invoice you have raised and one you have paid a subbie. We will tell you whether the CIS split on both is right and what it is costing you a month.
Common questions
Does CIS apply to groundworkers?
Groundworks sits inside the Construction Industry Scheme, all of it. Site preparation, laying foundations, providing access works and drainage are named as construction operations in the legislation. There is no scope argument to be had here. What makes groundworks awkward is that you are almost always a contractor and a subcontractor at the same time, on the same job.
Does the VAT domestic reverse charge apply to groundworkers?
Usually yes. The domestic reverse charge follows CIS scope. Where you supply groundworkers work that falls inside CIS to a customer who is VAT registered, registered under CIS and is not an end user, you do not charge VAT on the invoice. Your customer accounts for it instead. Supplies to homeowners and to end users stay outside it, and you charge VAT the normal way.