Accountants for Civil Engineering Contractors

Civil engineering work is inside the Construction Industry Scheme.

Roads, bridges, sewers, water mains, pipelines and railways are named in the legislation as construction operations. There is nothing to argue about on the main body of what you do.

The harder problem is the contract itself. A civils job running eighteen months across two year ends is an accounting problem before it is a tax problem, because revenue recognition, work in progress and retention all have to be got right or the accounts do not reflect the business.

One contract, two year ends

Sign in March, finish eighteen months later, and your first set of accounts still has to say something about a job that is half built.

Under FRS 102, revenue on a long contract is recognised by reference to the stage of completion. The profit in your accounts therefore rests on your own view of how much of the work is done and what it will cost to finish. That is a commercial judgement wearing the clothes of a bookkeeping entry.

Overstate it and you have declared profit you never earned, paid corporation tax on it, and pushed the correction into next year as a loss on a job you thought was winning. Understate it and the accounts make the business look weaker than it is, at the moment your bank or your bonding provider is reading them.

Work in progress makes it sharper. Cost sitting on site that nobody has certified is money already out of your account with nothing on the sales ledger against it. If your WIP is a spreadsheet somebody rebuilds from memory at year end, the accounts are guesswork with a signature underneath.

You do not invoice, you apply

Most civils work is paid on applications against a schedule of rates or a measured valuation. You apply, the client’s quantity surveyor certifies a figure, and the notice comes back at something other than the number you sent. On larger frameworks the client self-bills, so the document that triggers payment is written by them.

That leaves two reconciliations, and most contractors run neither properly. What you applied for against what was certified, and then what was certified against what actually cleared the bank.

Money disappears in those gaps. Rarely in one hit. Usually a few thousand at a time across forty valuations, and nobody notices until the job is finished.

Retention and bonds

Retention on civils contracts is held a long time, often until a defects period ends a year or more after practical completion. It is earned money and it belongs in the accounts as a debtor, rather than turning up as a pleasant surprise on the day it is released. Whether it is worth face value is another question. Retention released against a long defects list rarely comes back in full, and a firm carrying two hundred thousand pounds of it should have a view on how much will really arrive.

Performance bonds cost a premium and tie up facility that could have funded the next job. Both belong in the price you bid, not buried in overheads where no estimator sees them.

Variations, claims and a large subcontract base

Instructed work happens before agreed work. That is how sites run. The damage is done when variations sit uninvoiced for months, because the margin on the job reads wrong all the way through and the contract eats more cash than anyone budgeted for.

Underneath that you are paying a subcontract base that can run to hundreds of payments a month. Verification, deduction at the right rate, monthly CIS returns and statements out. At that volume it has to run as a process rather than as somebody’s Thursday afternoon.

What we do

Long contract accounting done during the year. Stage of completion, WIP and retention reviewed as you go, so the year end is a check rather than a rebuild.

CIS across a large subcontract base. Verification, deductions, monthly returns filed on time, statements out, year end reconciled.

Application to cash tracking. Every valuation followed from application through to what was banked, with the differences named and chased.

Job costing per contract, so you can see margin by job and by work type instead of one number for the year.

Cash flow planning built around retention releases, bond costs and the lag between doing the work and being certified for it.

Plus the ordinary compliance. Plus year end accounts, corporation tax, VAT returns, payroll and self assessment.

Who we work with

UK civil engineering limited companies turning over between £500,000 and £5 million, anywhere in the country. Groundworks and civils contractors, utilities civils, highways and drainage firms. Everything runs on cloud accounting, so where your yard is makes no difference.

Common questions

Is civil engineering work inside CIS?
Yes. Roadworks, bridges, sewers and pipelines are works forming part of the land, so the scheme applies to what you are paid and to what you pay your subcontractors.

Do CIS deductions come off an application for payment?
The deduction is made when the payment is made, and it applies to the labour element. Materials are excluded, so if your application does not show the material split clearly you can end up deducted on the whole figure.

How should retention be shown in the accounts?
As a debtor once the work that earned it has been done. Leaving it out until release understates the business and makes every year end look like a different company.

Our contract straddles two year ends. What does that do to the tax bill?
Taxable profit follows accounting profit, which follows the stage of completion. You can pay corporation tax on profit you have not been paid for, which is why the WIP and retention numbers matter well beyond the accounts.

Why is our margin per job never what the estimate said?
Usually variations priced long after they were built, plus retention treated as certain money. Both are visible during the job if the costing is set up for it.

Book a call. Bring your last two payment applications and the certificates that came back, and we will tell you what you have applied for and not been paid.

Book a call