Fire protection installation is inside the Construction Industry Scheme. The statutory list of construction operations includes the installation in a building or structure of systems of fire protection and water supply, which covers sprinkler and suppression work directly. Passive fire protection and compartmentation work is alteration of a building, so it falls in too.
There is no real argument to have about scope. The money questions on this trade sit elsewhere, and mostly in the type of work that has grown fastest.
Remediation contracts do not behave like new build
Fire safety remediation on existing buildings has become a large part of the market since the Building Safety Act, and a firm that moves from new build into remediation usually finds its cash flow changes shape before it notices why.
Remediation contracts tend to run longer against occupied buildings, carry heavier certification and evidence requirements, and sit under extended defect liability. The payment chain is longer as well, often running through a building owner and a managing agent rather than a single main contractor. Every extra link is another place a valuation can sit for a month.
The commercial effect is that the work looks better priced than it turns out to be. Access restrictions, out of hours working, resident liaison and the volume of documented evidence required all consume time that was priced as installation labour. Unless your job costing separates those hours from productive site hours, you find out at the end of the contract rather than at week six.
We would rather set the costing up before you take one of these on than review it afterwards.
Retention, certification and the cost of being approved
Retention. Fire protection work often attracts a longer defects period than other trades, and retention is released against certification and handover documentation rather than simply against time. It is taxable income when the work is done, so you pay corporation tax on it well before it arrives, and the second half is the part most often forgotten. A retention register that is actually chased is worth more to a business this size than most of the tax planning that gets discussed.
Third party accreditation. Certification such as BAFE registration or LPCB approval carries scheme fees, audit and surveillance visits, technical staff time and the cost of holding qualified people on the payroll whether or not the work is there this month. It is an allowable cost and it is also a fixed cost of trading. Sitting it in overheads hides the fact that it is effectively a licence fee per contract, and it should be priced as one.
Maintenance and inspection contracts. Periodic testing, servicing and inspection is recurring revenue with a very different margin profile to installation. It is billed in advance or on a cycle, which means part of it usually relates to a period after your year end and needs deferring rather than banking as this year’s profit. Firms that build a maintenance book and report it separately can see what their business is worth in a way that install-only firms cannot.
Long contracts crossing your year end
A sprinkler installation or a remediation package that starts in September and finishes the following August straddles two sets of accounts. What you recognise as revenue at the year end decides your corporation tax bill, and it is the single figure most likely to be wrong in a fire protection company’s accounts.
Applications for payment, certified valuations, uncertified work and costs incurred but not yet applied for all have to be reconciled to a position. Done properly it reflects the work you have actually completed. Done as a year end estimate it is either an overstated profit you pay tax on or an understated one that misleads you and your bank for a year.
What we do
Contract revenue recognised on a method that stands up, rather than estimated in the week before filing.
Retention tracked, aged and chased down across every live contract.
CIS operated correctly, both on deductions taken from you and on payments you make to subcontractors.
Job costing that separates installation labour, certification cost, access and documentation time.
Accounts, corporation tax, VAT, payroll and self assessment underneath all of it.
Who we work with
UK fire protection, sprinkler, suppression and passive fire limited companies turning over between £500,000 and £5 million, anywhere in the country.
Common questions
Is sprinkler installation inside CIS?
Yes. Installing systems of fire protection and water supply in a building is a named construction operation.
Is passive fire protection inside CIS?
Yes. Compartmentation and fire stopping work is alteration of a building.
When is retention taxable?
When the work is earned, not when the cash is released. That is why an aged retention register matters.
How should maintenance contracts be treated?
Income is spread across the period the service covers. Amounts billed in advance for a period after your year end are deferred.
How is a contract that crosses my year end reported?
On the basis of work completed to date, supported by applications, valuations and costs incurred. It is a calculation, not an estimate.
Book a call. Bring your current contract list and retention position and we will tell you what your year end profit figure should actually look like.
Common questions
Does CIS apply to fire protection and sprinkler installers?
Fire protection installation is inside the Construction Industry Scheme. The statutory list of construction operations includes the installation in a building or structure of systems of fire protection and water supply, which covers sprinkler and suppression work directly. Passive fire protection and compartmentation work is alteration of a building, so it falls in too.
Does the VAT domestic reverse charge apply to fire protection and sprinkler installers?
Usually yes. The domestic reverse charge follows CIS scope. Where you supply fire protection and sprinkler installers 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.