Installing a system is inside CIS. Repairing a part of one that already exists is outside it.
That single line decides how most of your invoices should be treated, and most plumbing companies have never had it explained.
HMRC’s own guidance puts installation of water, sanitation and heating systems inside the scheme. The example it gives of work that falls outside is soldering a leaking pipe. Fixing a component within a system that is already there is a repair, and repairs to systems of that kind are not caught.
So the same firm can run work on both sides of the line in one week, with nothing changing except what the job actually was.
What that looks like across your week
Outside CIS. A burst pipe at two in the morning. A leaking joint under a sink. Replacing a tap, valve, pump or radiator within an existing system. Reactive maintenance on a system that is already installed.
Inside CIS. A full bathroom installation. First fix and second fix pipework. A new soil stack. Putting in a system where there was not one before, or replacing a system rather than a component of one.
Firmly inside CIS. Anything you do on a new build. Contract plumbing for a housebuilder or a main contractor is construction work by any reading, and it will be treated that way by whoever is paying you.
Knowing the rule is the easy part. The problem is that your invoicing usually does not reflect it. If a job sheet says “plumbing works” and goes out as one line, a contractor will apply CIS across the lot, including the reactive work that was never in scope.
Which way you are getting it wrong
Plumbing firms tend to fall into one of two camps, and both cost money.
Everything treated as inside. You have had 20% taken off callout and repair work that sat outside the scheme. It comes back through your corporation tax return or a repayment claim, but it has been out of your account for months first, and on a firm doing volume reactive work that is real money.
Everything treated as outside. Common in firms that grew out of domestic repair work and then picked up a housebuilder or a commercial contract. Suddenly you are a subcontractor on a construction site, or you are paying your own labour on one, and there are returns you should have been filing.
The fix is the same in both directions. Decide the treatment at the point the job is booked, and let the invoice carry it.
Emergency work makes forecasting harder than it looks
A plumbing business with a strong callout book has revenue that arrives in a pattern nobody controls. A cold snap in December can be the best fortnight of your year, and a mild winter can quietly take a chunk out of it.
That is fine as long as your fixed costs and your wage bill are planned against the contract and maintenance income rather than against the callout income. Firms get into trouble when a good winter funds an extra van and a mild one has to carry it.
Contract work behaves the opposite way. Predictable value, agreed programme, and payment terms that can run to forty five days or worse, with retention held on top. A business doing both has two very different cash cycles running through one bank account, and separating them in the reporting is what makes the forecast usable.
Merchant accounts and the stock in your van
Every plumbing firm has money sitting in vans and merchant accounts that never shows up properly in the figures.
Parts bought on account and charged to a job that has not been invoiced yet. Stock carried in the van for months. Materials collected for one job and used on another. Left alone, it makes a good month look bad and a bad month look fine.
The other half of it is VAT. Work invoiced to a homeowner carries VAT as normal. Work invoiced to a VAT registered contractor on a job inside CIS falls under the domestic reverse charge, so no VAT is charged and they account for it instead. A firm doing domestic repairs on Monday and a housebuilder’s plots on Tuesday has to get both right on the same VAT return.
What we do
CIS applied job by job, with the installation and repair distinction used properly rather than blanket-applied.
Deductions reclaimed where they were taken on work outside the scheme.
VAT set up so the reverse charge applies itself on contract work and stays off your domestic invoices.
Job costing that separates your reactive work from your contract and maintenance work, because they rarely carry the same margin.
Cash flow planning that treats callout revenue as the variable it is.
Plus the ordinary compliance. Underneath it all, the usual. Year end accounts, corporation tax, VAT, payroll and self assessment.
Who we work with
UK plumbing and mechanical limited companies turning over between £500,000 and £5 million, anywhere in the UK.
Common questions
Do plumbers need to register for CIS?
If you install systems, work for contractors, or pay your own subcontractors on construction work, yes. A firm doing only reactive repairs for homeowners often does not need to, but most firms do both.
Is emergency repair work inside CIS?
Generally no. Repairing a component within an existing system sits outside the scheme, and HMRC gives soldering a leaking pipe as its example.
What about a full bathroom installation?
Installing systems of sanitation and water supply is a construction operation, so that sits inside the scheme.
A contractor deducts 20% from every invoice. Is that right?
Not if some of it is repair work outside the scheme. Split the invoice so they can see which is which, and challenge what has already been taken.
Do I charge VAT to a housebuilder?
Not where the reverse charge applies and they are not the end user. Domestic customers are charged VAT as normal.
Book a call. We will go through your last twelve months of jobs and tell you which should have had CIS applied and what you can claim back.
Common questions
Does CIS apply to plumbers?
Installing a system is inside CIS. Repairing a part of one that already exists is outside it. That single line decides how most of your invoices should be treated, and most plumbing companies have never had it explained. HMRC’s own guidance puts installation of water, sanitation and heating systems inside the scheme. The example it gives of work that falls outside is soldering a leaking pipe.
Does the VAT domestic reverse charge apply to plumbers?
It follows the CIS answer above. Where the work falls inside CIS and your customer is VAT registered, registered under CIS and is not an end user, the reverse charge applies and you do not charge VAT. Where the work falls outside CIS, or the customer is an end user or a homeowner, you charge VAT as normal. Two jobs in the same week can be treated differently.