Accountants for Steel Erectors

Your fabrication is outside the Construction Industry Scheme. Your erection is inside it.

The legislation excludes the manufacture of materials, components, plant and machinery off site. It includes the erection of structural steelwork on site as a construction operation.

So one company, often one job, carries two tax treatments. The steel you cut, drill, weld and paint in the shop is outside the scheme. The moment the crane lifts it into position, you are doing work that is inside it.

Nothing about that is a grey area. What is difficult is making the contractor paying you treat it correctly.

Put the split on the invoice

A main contractor receiving an application that says “structural steel package, £180,000” has one sensible option. He applies the deduction to the whole figure and lets you argue about it afterwards.

Show the elements separately, on the application and on the invoice, and there is nothing left to interpret. Off-site fabrication on one line, delivery to site on another, and site erection labour on a third.

Do it from the first valuation on a job rather than the fourth. Once a contractor’s quantity surveyor has set the job up in his system with the deduction running across everything, getting it changed mid-contract takes longer than it should.

If it has already gone wrong, the money is recoverable. It is simply recoverable slowly, and in the meantime it is your working capital funding somebody else’s compliance.

Steel in the yard is not a cost yet

Fabricated steel sitting in your yard waiting for a slab to cure is work in progress. It is an asset, and it stays on the balance sheet until it goes out.

Firms that write the steel to cost of sales the day the mill invoice arrives get monthly accounts that swing violently. A heavy fabrication month shows a loss. The following month, when the same steel goes up and gets invoiced, shows a margin that looks unrepeatable. Neither figure is true and you cannot run pricing off either of them.

This matters beyond tidiness. A lender or a bonding provider looking at your accounts wants to see what the business owns. Steel worth £120,000 stacked in the yard is either an asset on the balance sheet or it is nothing at all, and only one of those is right.

Lead times, deposits and mill prices

You are buying steel months before you get paid for it, at a price you agreed before that.

Two things follow. Your cash flow has a long trough in it that has nothing to do with how well the business is trading, and a fixed price quoted against a mill price that has since moved eats a margin you thought you had. Quotation validity periods are the cheapest protection available and plenty of firms still leave them off.

Deposits need care as well. A deposit taken from a customer for steel you have not fabricated is money in your bank that you have not earned. Treat it as income in the month it arrives and you will pay tax on profit you have not made, and you will misread how the year is going.

Retention

Five per cent held, half released at practical completion and the rest at the end of the defects period, is normal on a steel package.

Two things go wrong with it. The profit was recognised when you did the work, so the accounts show money the bank does not have. And the second half often goes unchased, because by the time it falls due the job is eighteen months gone and nobody owns it. Retention is worth tracking on its own schedule with dates against it, and it is worth somebody’s job to chase.

What we do

CIS split correctly across fabrication and erection, with the invoicing and applications set up so it happens by default rather than by memory.

Deductions recovered where a contractor has applied CIS to fabrication.

Work in progress valued properly, so your monthly accounts reflect what you built rather than when you bought steel.

Job costing across shop hours, site hours, steel, plant and cranage, with margin per package.

Cash flow forecasting around material buying, deposits, valuation dates and retention release.

Plus the ordinary compliance. We do the ordinary work too. Year end accounts, corporation tax, VAT, payroll and self assessment.

Who we work with

UK structural steel and steel erection limited companies turning over between £500,000 and £5 million. Fabricators and erectors, including plenty of firms doing both.

Common questions

Is structural steelwork inside CIS?
Erecting it on site is. Manufacturing it off site is an excluded operation. Most steel firms are doing both, which is why the invoice matters.

A contractor is deducting CIS from our fabrication. Can we stop it?
Split the fabrication, delivery and erection elements on the application. If the deduction has already been taken, it is recoverable.

Does delivery to site fall inside the scheme?
Delivery of manufactured components to site is treated with the manufacturing, so it sits outside. Show it as a separate line.

How should fabricated steel in the yard be treated?
As work in progress on the balance sheet, until it is erected and invoiced.

Does the VAT reverse charge apply to us?
On work inside CIS invoiced to a contractor who is not the end user, yes. Mixed packages need the same care on VAT as they do on CIS.

Book a call and send us one application for payment on a steel package. We will tell you whether the fabrication and erection split on it will survive a main contractor’s QS.

Book a call