Accountants for Painters and Decorators

Painting and decorating is inside the Construction Industry Scheme, and there is no argument to be had about it.

The Finance Act 2004 list of construction operations names “painting or decorating the internal or external surfaces of any building or structure”. It is written in. No test to apply, no grey area to work through.

So if you invoice a main contractor or a housebuilder, you are a subcontractor under the scheme, and they will deduct tax before they pay you.

You are in. The only question left is which rate you are in at.

Most decorators have never checked whether they could be on gross payment status

Standard rate under CIS is 20%. Verified subcontractors who pass HMRC’s tests can instead be paid gross, with nothing taken off at source, and settle their tax through the normal corporation tax route.

For a decorating company turning over £1 million on contract work, that is a very large amount of money arriving months earlier than it otherwise would. It is the single cheapest cash flow improvement available to a business in this trade, and it costs an application.

There are conditions to meet, including a turnover test and a compliance test. The compliance test is the one that catches firms out, because it looks at whether your returns and payments have gone in on time.

Plenty of decorating companies would pass today and have simply never applied. Others would fail on one late PAYE payment from eighteen months ago and could fix that within a year if somebody told them.

Materials should not be inside the deduction

This one costs decorating firms real money every month.

CIS is deducted from the labour element of your invoice. The cost of materials you have paid for is excluded from the calculation. Paint, sundries, coverings, hire of access equipment, all of it sits outside the amount the contractor applies 20% to.

If your invoice says “decorating works, £8,000” with no split, the contractor has nothing to work from and will usually apply the deduction to the whole lot. On a job where £2,000 of that was paint, you have had £400 taken that should never have left your account.

You do get it back eventually, through your corporation tax return or a repayment claim. Eventually is doing a lot of work in that sentence.

Split labour and materials on the face of every invoice. It takes ten seconds and it is the difference between being paid correctly and lending HMRC money for a year.

Labour-only gangs and the status question

Most decorating companies of any size pay other decorators. That makes you a contractor as well as a subcontractor, with verification to run and monthly returns to file.

It also raises the harder question. If a man works for you four days a week, in your van, in your branded shirt, taking your instructions on which room to start in, HMRC may take the view that he is an employee rather than a self employed subcontractor, whatever the CIS paperwork says.

CIS registration does not settle employment status. The two are separate tests, and losing the status argument means PAYE, National Insurance and penalties going backwards.

Domestic work, contract work and the winter

Two things sit behind most of the financial trouble in this trade.

The first is VAT. Work you invoice a homeowner direct is standard VAT charged as normal. Work you invoice a VAT registered contractor for, on a job inside CIS, falls under the domestic reverse charge, so you do not charge VAT at all and they account for it. Firms doing both sides get this wrong in both directions.

The second is the calendar. External work stops when the weather turns, interiors carry January and February, and a decorating business that does not plan for that gap spends every winter borrowing against next spring.

What we do

CIS handled monthly, both directions, with verification and returns done on time so the compliance test stays passed.

Gross payment status reviewed, applied for where you qualify, and protected once you have it.

Invoicing set up so labour and materials are separated and the deduction is taken on the right number.

Job costing that shows you margin by job type, because contract work and domestic work rarely pay the same and most firms guess which way round it goes.

Everything else you would expect as well. The routine compliance runs alongside all of that. Accounts, corporation tax, VAT, payroll and self assessment.

Who we work with

UK painting and decorating limited companies turning over between £500,000 and £5 million, anywhere in the UK.

Common questions

Do painters and decorators need to register for CIS?
Yes, if you work for contractors. Painting and decorating is named in the legislation as a construction operation. If you also pay other decorators, you need to register as a contractor as well.

Is CIS taken off my materials?
It should not be. The deduction applies to the labour element. Show materials separately on the invoice so the contractor can exclude them.

How do I stop having 20% taken off?
Apply for gross payment status. You need to meet HMRC’s turnover and compliance tests, and keep your filings clean afterwards.

Do I charge VAT to a main contractor?
Not where the reverse charge applies and they are not the end user. You charge VAT normally on domestic work.

Are the lads on my books self employed?
That depends on how they actually work, not on what the contract says. It is worth reviewing before HMRC does it for you.

Book a call. We will tell you whether you qualify for gross payment status, and what stopping the 20% would do to your cash position.

Book a call