Ask an accountant: construction and trades
The questions builders, subcontractors and contractors actually ask, answered the way they would be answered on a call: the short answer first, then why, then the free tool if there is one. Rates are those applying in 2026/27.
23 questions, answered plainly
No. The deduction applies to the labour element alone. Materials, VAT, plant they hired in, consumable stores, fuel other than for travelling and prefabrication all come off first. On a £4,000 invoice with £1,500 of materials the deduction should be £500, not £800. Ask them to correct it. Nothing is lost either way, but the difference is your cash held until your year end.
No. The higher rate applies from that payment onwards and cannot be re-rated later. Verify them now so the next payment is right, and tell them what happened, because the extra 10 per cent is their money sitting with HMRC until their return.
Yes. If you are registered as a contractor a return is due for every tax month whether or not you made payments. A month with no subcontractors is a nil return, not no return, and missing it is £100 the day it is late. If work has stopped for a while, tell HMRC you are inactive and returns stop falling due for six months.
Yes. Where you deduct the levy from a payment it is excluded from the gross amount of payment shown on the monthly return, so it reduces the figure CIS is calculated on. HMRC's own example is a £1,000 contract with a £7 levy, reported as £993.
Yes, and in two directions at once. Your profit is understated by the whole amount, and then the same money is claimed again as a credit against the tax bill. On a typical set of figures that turns a £21,600 profit into a £3,960 loss on paper, which is what a lender or a mortgage broker reads. It is tax paid on account and belongs on the balance sheet.
Because turnover for this test means net construction turnover, which HMRC defines as gross income from construction work excluding VAT and the cost of materials. If £20,000 of that £48,000 was materials you have £28,000 of labour, and you fail by £2,000. It is a labour test wearing the word turnover.
It is a cash flow gain rather than a tax saving. The same tax is due either way, just later. On £28,000 of labour it means holding £5,600 yourself instead of HMRC holding it until your return. Whether that is worth the compliance discipline it demands depends on how tight your cash is.
They do, but it has to be in writing. If they are an end user or an intermediary supplier they must tell you so, by post, by email or in the contract. Until that arrives the reverse charge applies and you must not charge VAT. The information sits with them and the risk of getting it wrong sits with you, so ask at quoting stage.
Yes, and it is worth acting on. If your sales are reverse charged you charge no output tax, and you still pay VAT on materials, fuel and plant hire. Moving to monthly returns gets that money back three times as often. On a £25,000 a month business that is around £5,000 of cash released.
The working capital you used to hold. Before 1 March 2021 you collected the VAT and held it until the return fell due, which on quarterly returns averages about 2.7 months. On £25,000 a month that is roughly £13,700 that stopped arriving and did not come back. If you have not repriced since, your quotes still assume it.
No. New build residential work is zero rated, and the reverse charge only applies to standard and reduced rated supplies. If a contract starts as zero rated new build and moves into standard rated work, the charge moves with it.
No. CIS decides whether a deduction is taken. Employment status decides whether they should have been on your payroll, and the two systems do not talk to each other. Correct CIS treatment is no defence at all against a status challenge, and the PAYE and employer National Insurance would be yours to pay.
Probably not. From 6 April 2025 most double cab pickups are treated as cars for the benefit charge. On a £40,000 vehicle at 37 per cent that is the difference between a £4,968 benefit and a £25,604 one, or about £11,350 a year for a higher rate taxpayer. If you bought, leased or ordered it before that date, van treatment runs to the earlier of lease expiry or 5 April 2029.
Until you expect to be there more than 24 months, if you also spend at least 40 per cent of your working time there. It turns on expectation rather than hindsight: a site you expected to run three years is a permanent workplace from your first day, and one you expected to run eighteen months is allowable until the day your expectation changed.
Only for the first 10,000 in the tax year. After that it is 25p. So 12,000 miles is £6,000 rather than £6,600, and the average is 50p. The band follows you rather than the vehicle, so two vans do not give you two bands, and it resets on 6 April.
Backwards, from what you need out of the year and the days you actually bill. A year has 260 working days and once holiday, sickness, quoting and weather are out it is nearer 200. £56,000 over 199 days is £281 a day. Over 260 it is £215, and quoting that leaves you £13,138 short even if you bill every day you have.
No, it is 9.1 per cent. A markup is measured on what the materials cost and a margin on what you charged. To make a 20 per cent margin you have to add 25 per cent. The error always goes the same way, which is undercharging, and on a materials-heavy job it is most of what you thought you were making.
Yes, and gross it up, because whatever you add gets retained too. On a £120,000 contract at five per cent, half released at six months and half at eighteen, financed at ten per cent with fifteen per cent never recovered, the cost is about £1,410 and the uplift that leaves your profit whole is about £1,427.
Because it costs the chargeable time it displaces, not the hours on site. Two hours there plus an hour and a half travelling is about £177 once the lost time is counted, and £123 of that is time nobody invoices. Three a month is £6,365 a year. That is what it is worth spending to avoid one.
With whether you are trading at all, then whether you should be a sole trader or a company, then registering. After that the two things construction adds to an ordinary business are CIS and the VAT reverse charge, and both have more to them than a paragraph. The handbook covers the lot in ten chapters and is free.
Yes, and it is very common. You deduct from the people below you and are deducted from by the people above, and the two sides are accounted for completely differently. What you deduct is money you hold for HMRC. What is deducted from you is tax paid on account and belongs on your balance sheet.
Yes. The six conditions, the end user notification, what goes on the invoice, the VAT return boxes, the 5 per cent disregard and what the change did to working capital, in eight chapters. It is free and there is no email form.
Almost certainly nothing, in the profit and loss sense. Wages and materials go out weekly and stage payments arrive four to eight weeks after the work is done. A profitable book and an empty account are the same thing eleven weeks apart, and no profit and loss will show it. A thirteen week cash flow will.
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