Accounting for Construction Companies

Building your Business Brick by brick

Working with hundreds of construction businesses across Lancashire (big and small), we know the financial underpinnings of the trade like the back of our hand, leaving us fully-equipped to deal with your entire spectrum of needs.

Experts when it comes to construction-related VAT, we are in an ideal position to support your specific accounting needs.

What’s more? We offer monthly VAT submissions to aid the cashflow of contractors and subcontractors alike.  

Not all construction clients are the same, and as such, there is no one size fits all when it comes to contractor accounting.

From the moment you sign up with Gow and Partners, your accounts manager will work hard to build (excuse the pun!) a deep understanding of the intricacies attached your business and its functioning, providing you with tailored services and advice.  

Unique Features of VAT for Construction

If you are new to construction, or simply need a recap, here are some VAT features specific to your industry:

• ‍Reverse Charge Mechanism: the reverse charge mechanism is applicable to certain supplies in the construction industry. Under this system, the recipient of the supply is responsible for accounting for the VAT, instead of the supplier. This mechanism helps to reduce fraud and tax evasion.‍
• Reduced VAT Rates: the UK provides reduced rates of VAT for certain construction services, such as the renovation of residential properties or the installation of energy-saving materials.‍
• Special VAT Schemes: construction businesses can also choose to use special VAT schemes, such as the Flat Rate Scheme or the Annual Accounting Scheme. These schemes provide simplified accounting methods and can reduce administrative burdens for small businesses.‍

The Construction Industry Scheme (CIS)

The Construction Industry Scheme (CIS) details HMRC’s tax policy for subcontractors working within the construction industry. It also outlines how payments must be handled by contractors.

In line with the CIS, contractors are required to deduct money from a subcontractor’s payments and send them to HMRC.

These deductions count as advance payments towards a subcontractor’s tax and National Insurance.

This legal arrangement, although efficient for HMRC, can often be a hassle for contractors to undertake solo, especially when coupled with the responsibilities attached to running a business full-time.

One thing is certain. Whether you are a contractor or a subcontractor, we can attend to all your CIS related needs, freeing up time and providing you with clarity of mind.

We also update our construction clients whenever any changes are made to CIS regulations, offering insight and support regarding how it will affect them.

Contractors – What is Required?

Under the CIS, contractors are required to register with HMRC, check whether their subcontractors are registered with HMRC, pay subcontractors, deduct tax and submit monthly statements confirming that these payments have been made.

Luckily, we offer a range of services to ease the burden of these obligations, alleviating pressure for you to focus on your business, while ensuring full compliance.

Contractors Specific Services

• Register you as a contractor with HMRC.
• Verify your subcontractors with HMRC.
• Ensure that you are paying your subcontractors correctly, as per the terms of the CIS.
• Manage CIS deduction statements and supply them to your subcontractors.
• Manage records and deliver you monthly tax returns to HMRC.
• Provide deadline reminders to ensure that you know what documentation we require from you, sidestepping the possibility of incurring penalties.
• Bespoke cloud accounting packages to streamline your finance function.
• Supply tailored plans for optimal tax-efficiency (upon request).

‍

Accountancy plays a crucial role in the success of construction companies.

Proper financial management and record-keeping are essential to ensure that a construction business remains profitable and sustainable.

We will help you make informed decisions, deciphering your financial information, tracking expenses, and managing cash flow.

Subcontractors – What is Required?

Under the CIS, subcontractors must register with HMRC. They are also required to keep HMRC up to date with any changes to their business, including change in address, business name, business partners or any other relevant intel.

This can be tedious and time consuming, but it doesn’t have to be. We can take care of all your HMRC-related administration, while you focus on completing your contracts stress-free, just how it should be.

Subcontractor Specific Services

• Determine your status (i.e. subcontractor employee, or both) and register you with HMRC appropriately.
• Verify you with HMRC on behalf of your contractor.
• Manage and organise your business records.
• Prepare your end of year self-assessment tax return and calculate your tax liability/refund where applicable.
• Bespoke cloud accounting packages to streamline your finance function.

‍

It is important to note that for every contract you undertake, your contractor must determine whether or not you are to be treated as employed or self-employed.

If it is determined that you are an employee, the contractor is legally obliged to operate a PAYE scheme, whereby the tax and National Insurance Contributions you owe are deducted from the payments made to you.

If it is determined that you are self-employed, HMRC will register you as a sub-contractor under the CIS scheme, setting you up to receive payments 'under deduction'. This means your contractor must make a deduction of tax at 20% (30% if you are unverified) from the labour element of your invoices, before paying it over to HMRC.

Let us Help You

Book your 30 minute discovery call today— enjoy a relaxed, no-obligation chat with one of our qualified accounting advisors. We can assess your situation and determine how to best serve and add value to your business.

Alternatively, you can send us a message with any queries (big or small), and one of our team members will get back to you promptly.