Sector specialism
Accountants for construction firms
Contractors, subcontractors and trades working under CIS.
Construction accounting is mostly mechanics — and the mechanics are where it goes wrong.
CIS deductions, the domestic reverse charge, retentions held for a year, contracts that straddle two year-ends. None of it is conceptually hard. All of it is easy to get wrong, and the corrections take months to unwind once HMRC is involved.
CIS, both directions
Most firms in this sector are both contractor and subcontractor, which means CIS runs in both directions at once — deductions suffered on money coming in, deductions made on money going out, and monthly returns covering the lot.
- Subcontractor verification before the first payment, not after
- Monthly CIS returns filed on time — the late-filing penalties escalate quickly
- Deductions applied to labour only, with materials correctly excluded
- CIS suffered reclaimed through the payroll rather than left sitting with HMRC
- Gross payment status applications, and keeping the compliance test passed
The materials point is the one that costs real money. Apply a 20% deduction to the whole invoice instead of the labour element and you've handed HMRC cash that takes a year to get back. We see it constantly on firms arriving from a general-practice accountant.
The domestic reverse charge
Since 2021, VAT on most construction services between VAT-registered businesses is accounted for by the customer rather than the supplier. It was the biggest cash-flow change the sector has had in a decade, and a lot of firms are still applying it inconsistently.
The practical effect is that subcontractors stopped collecting VAT they used to hold for a quarter — which, for anyone who was quietly relying on that float as working capital, is a permanent hole that has to be funded another way. We check whether the charge applies supply by supply, get the invoice wording right, and make sure the cash-flow consequence is planned for rather than discovered.
Contracts, retentions and knowing where you stand
A construction year-end is only as good as the work-in-progress figure behind it. Long contracts need revenue recognised as work is performed, retentions tracked as the asset they are, and provisions made for the ones that are going to be argued about.
We build contract-level reporting so you can see margin per job rather than margin per year. That's the number that tells you which type of work to bid for and which client is quietly costing you money — and it's the number most firms in this sector don't have.
R&D relief is worth a mention. Genuine process innovation in construction does qualify, but this is a sector that has been heavily targeted by claims firms selling weak claims, and HMRC's enforcement has caught up. We'll make the claim where it stands up and tell you plainly when it doesn't — see business advisory for how that work runs.