Accountants for UK Construction Firms and Trades
Most builders, plumbers, electricians and contractors did not start their business to spend their evenings on paperwork. They started to do the work. CIS verifications, monthly returns, Domestic Reverse Charge VAT, gross payment status, materials versus labour calculations — none of that built a single house. But get any one of them wrong and the penalties stack up fast, especially after the major CIS reforms that came into force on 6 April 2026.
NDCA is an ACCA-regulated accountancy practice working with UK construction firms, main contractors, subcontractors and self-employed trades, working primarily on Xero. We charge a fixed monthly fee so your CIS returns, year-end and tax are managed every month — not scrambled for after a penalty letter arrives.
Contact us today for a free consultation to walk through your situation.
The CIS reforms that took effect in April 2026
The biggest shake-up of CIS in years. Since 6 April 2026:
- Nil returns are mandatory again. Contractors must file a CIS return every month, even if no subcontractors were paid. A late or missing return triggers a £100 fixed penalty, rising to £200 at two months, £300 (or 5% of the CIS due) at six months, and a further tax-geared penalty at twelve months.
- HMRC can revoke gross payment status immediately where a business “knew or should have known” it was party to a transaction connected to fraud — modelled on the existing VAT fraud rules. The wait to reapply has increased from one year to five.
- Penalties of up to 30% of lost tax apply to the business, its directors, and connected persons where the “knew or should have known” test is met. End users in the supply chain can also be made liable for the tax loss.
- Payments to local authorities and certain public bodies are now outside the scope of CIS.
For most contractors, the practical implication is sharper verification, tighter onboarding of new subcontractors, and a watertight monthly nil-return process. We handle the verification, the returns and the documentation as part of the monthly engagement so the compliance burden does not land on the office or the site.
The tax issues that catch construction firms out
Construction tax is its own ecosystem. CIS sits on top of VAT, sits on top of self assessment or corporation tax, and the three rules interact differently for every type of trade. The issues we see most often:
CIS deduction rates and verification
Wrong verification means the wrong deduction rate — and the wrong deduction rate hits cash flow every month.
There are three CIS deduction rates: 0% for subcontractors with gross payment status, 20% for HMRC-verified registered subcontractors, and 30% for unregistered or unverified subcontractors. The rate is determined by HMRC at verification — contractors cannot choose it. Wrong-rate deductions are the single most common CIS error we see. We verify every new subcontractor before their first payment, and re-verify where one has dropped out of returns for the current or previous two tax years.
Domestic Reverse Charge VAT
The contractor accounts for VAT on the supply, not the subcontractor.
In effect since March 2021, the Domestic Reverse Charge applies to most B2B construction supplies between VAT-registered businesses operating under CIS. The supplier does not charge VAT — the customer self-accounts for it on their own VAT return. This rule does not apply to end users (homeowners, businesses that do not on-sell construction services) or to intermediary suppliers (VAT and CIS-registered businesses connected to an end user, where they have notified the subcontractor of their status in writing).
Materials versus labour
CIS is deducted on labour only — getting the split wrong overdeducts on every invoice.
CIS applies to the labour element of a payment, not the materials. Genuine materials costs purchased by the subcontractor are excluded from the deduction base. The materials must be evidenced — if the subcontractor cannot provide receipts, HMRC may treat the full payment as labour. Plant hire is also excluded. The split has to be set out clearly on every invoice. We make sure your invoice template, Xero set-up and Apron capture all work to the same rules.
Gross payment status
Worth a lot in cash flow — and at higher risk since the April 2026 reforms.
A subcontractor with gross payment status is paid in full with no CIS deduction at source. Three tests apply: a business test (£30,000 net construction turnover for a sole trader, £30,000 per partner up to £100,000 for the partnership, or £30,000 per director up to £100,000 for a limited company); a compliance test (every tax return and payment up to date, including VAT compliance from April 2024); and a 12-month compliance history check. From 6 April 2026, Since 6 April 2026, HMRC can revoke gross status immediately on a fraud connection, and the wait to reapply is five years.
Retentions
Money you have earned but cannot bank yet.
Retentions — the 3–5% withheld by the contractor pending defect-free completion — are accounted for as income when the work is invoiced, even though the cash arrives months later. That can leave you paying tax on money you have not received. We post retentions correctly in Xero, track their release, and factor them into cash flow forecasting.
Self assessment and CIS refunds
Most subcontractors are owed money at the end of the tax year — fewer claim it.
CIS deductions are payments on account of tax, not the final bill. When you file your self assessment, your actual tax bill is calculated and the difference is refunded. Most sole-trader subcontractors are due a refund of £1,000–£3,000+ each year because allowable expenses bring the actual tax bill below the CIS already deducted. Limited company subcontractors offset CIS suffered against PAYE through the Employer Payment Summary, or claim a refund after year-end. We claim every penny owed.
What can a construction worker claim as an allowable expense?
This is where most trades overpay tax. Allowable expenses are those incurred wholly and exclusively for the business — and in construction, there are more than most people realise.
Tools and equipment:
- Hand tools (drills, saws, chisels, levels, screwdrivers)
- Power tools (cordless, mains, battery replacements)
- Plant and machinery (mixers, generators, compressors)
- Ladders, scaffolding, access equipment
- Replacement and repair of tools
Protective clothing and PPE:
- Hi-vis jackets and vests
- Steel toe-cap boots and safety footwear
- Hard hats and safety helmets
- Gloves, knee pads, ear and eye protection
- Branded work clothing with a permanent business logo
Not allowable: ordinary clothing such as jeans, t-shirts, or trainers, even if only worn for work.
Vehicle and travel costs:
- HMRC simplified mileage at 45p per mile for the first 10,000 business miles, then 25p per mile after that
- Or actual running costs — fuel, insurance, repairs, road tax — apportioned to the business-use percentage
- Parking, tolls, congestion charges
- Public transport for genuine business journeys
Each vehicle is locked into one method (simplified or actual) and the method cannot be changed mid-life of that vehicle.
Materials and consumables:
- Building materials purchased for jobs (bricks, timber, cement, plaster)
- Fixings and fasteners (nails, screws, brackets)
- Adhesives, sealants, paint
- Site cleaning consumables
Subsistence and accommodation when working away from base:
- Overnight accommodation at temporary workplaces
- Evening meals when staying away overnight
- Subsistence at sites under the 24-month rule (you cannot be at a “temporary” site for more than 24 months)
Not allowable: routine meals at a regular site, or the price of a sandwich on a job you do every day.
Other allowable expenses:
- Public liability and tools insurance
- Trade body membership and professional fees
- Accountancy and bookkeeping fees
- Mobile phone and internet (business proportion)
- Use of home as office (HMRC simplified rate £10–£26 per month depending on hours worked)
- Marketing and advertising
- Subcontractor payments (correctly processed through CIS)
Capital allowances on bigger purchases:
- Annual Investment Allowance — 100% deduction on qualifying plant and machinery up to £1,000,000 per year
- Vans, tools and equipment over the immediate-expense threshold
- Full expensing for qualifying new assets bought by limited companies
The difference between the right and wrong expenses claim on a busy trade business can easily be £3,000–£8,000 of tax a year. We capture it all.
Who we work with
NDCA construction clients fall into a few groups:
- Sole-trader trades — bricklayers, electricians, plumbers, plasterers, joiners, decorators
- Limited company subcontractors operating through their own company
- Main contractors running sites with multiple subcontractors
- Property developers and small house-builders
- Construction firms that operate as both contractor and subcontractor
- Trades applying for or holding gross payment status
- Specialist trades — roofers, scaffolders, groundworkers, HVAC engineers
- Civil engineering and groundworks firms
If your situation is not on the list, send us a message — it almost certainly fits.
How NDCA works
Three things make our service different for construction firms specifically.
- Fixed monthly fee
You pay one price every month for everything we agreed at the start — bookkeeping, monthly CIS returns, VAT, payroll, year-end, self assessment or corporation tax. No per-return charges, no clock-watching, no surprise invoices when a CIS deadline lands. - A real human, fast
You get a named accountant who knows your jobs, not a ticket queue. Most queries get a reply within one working day, which matters when a new subcontractor is starting on site tomorrow morning. - Built around how trades actually work
Construction does not run on a calendar. It runs on completion dates, stage payments, retentions, materials orders and a new subcontractor showing up at 7am on a Monday. We build the workflow around that, not around standard quarterly cycles.
The right tool for the job
Most of our services run on Xero. CIS is one of the few exceptions.
Xero handles CIS for some contractors well — straightforward subcontractor lists, simple deduction profiles, clean monthly cycles. For everyone else, dedicated CIS software is faster and more accurate. We use specialist CIS tools where they outperform Xero on subcontractor verification, monthly returns, and deduction statements.
The decision is based on your setup, not ours. After the first call we tell you which platform we will run your CIS on and why. You get the same fixed monthly fee either way.
If you are already on Xero for everything else, your CIS data still flows back so the bookkeeping, VAT and year-end picture stays connected.
Apron for invoice capture
Subcontractor invoices and materials receipts are where CIS errors usually start. Materials charged separately from labour need to be excluded from the deduction calculation. Mixed invoices need splitting. Missing invoices mean the wrong deduction.
We use Apron to fix this at the source. Subcontractors and suppliers send invoices to your dedicated Apron email address, and the supplier, date, amount, VAT and line items are pulled out automatically and pushed into Xero. Materials and labour are visible on every invoice, so the CIS deduction is calculated on the right figure first time. By the time year-end arrives, every payment is supported by paperwork already in the system — important not just for cash flow, but for the “knew or should have known” fraud test that came into force in April 2026.
Sorting out CIS or VAT on a project?
CIS deadlines and Domestic Reverse Charge rules do not pause for site days. Send us your situation — we will come back within one working day with a fixed monthly quote.
Reviews
Discover why businesses trust us for dependable accounting services and practical financial advice.
Switching from another accountant
If you already have an accountant and you are not happy, switching is simpler than people think. We send your current accountant a professional clearance letter, collect your records, and pick up where they left off. Most construction clients are fully on-boarded within two weeks.
You do not need to wait for the next CIS month. You do not need an awkward phone call. We handle it.
Construction industry FAQs
If you are a contractor in the construction industry, yes — you must register before making any payments to subcontractors. If you are a subcontractor, registration is voluntary, but unregistered subcontractors suffer a 30% deduction rate instead of 20%, which costs cash flow every month. Most subcontractors register.
Registered subcontractors verified by HMRC are deducted at 20% on the labour element of payments. Unregistered or unverified subcontractors are deducted at 30%. Subcontractors with gross payment status are paid in full with no deduction. The rate is set by HMRC at verification — contractors must apply the rate HMRC tells them to.
Monthly, by the 19th of the month covering the previous tax month (6th to 5th). For example, payments made between 6 March and 5 April 2026 must be reported by 19 April 2026. From 6 April 2026, contractors must file a nil return where no subcontractors were paid in the month — failing to do so triggers a £100 penalty.
From April 2026, the full penalty regime is reinstated: £100 for a return one day late, £200 at two months, £300 (or 5% of the CIS due) at six months, and a further tax-geared penalty at twelve months. Repeated late filing can also affect your gross payment status.
Three main changes: nil returns are now mandatory when no subcontractors are paid in a month, the full late-filing penalty regime is back, and HMRC has new powers to immediately revoke gross payment status where a business "knew or should have known" it was part of a fraudulent supply chain. The reapplication wait has gone from one year to five years.
A status that lets a subcontractor receive payments without any CIS deduction at source. To qualify, you must pass a business test (minimum £30,000 net CIS turnover for sole traders, £30,000 per partner for partnerships, £30,000 for a company), a compliance test (every tax obligation up to date), and a 12-month compliance history check. We assess whether you qualify and handle the application.
A VAT rule that applies to most B2B construction supplies between VAT-registered businesses operating under CIS. The supplier does not charge VAT — the customer self-accounts for it on their own return. It does not apply to end users (homeowners, businesses that do not on-sell construction services) or to connected parties.
Yes. CIS is calculated on the labour element only. Genuine materials costs purchased by the subcontractor are excluded from the deduction base, provided they are listed separately and can be evidenced. Plant hire is also excluded.
Often, yes. CIS deductions are payments on account of tax, not the final bill. Sole-trader subcontractors reclaim any overpayment through self assessment. Limited company subcontractors offset CIS suffered against PAYE through the Employer Payment Summary or claim a refund after year-end. Many subcontractors are owed £1,000–£3,000 or more each year.
Tools, power tools, plant, PPE and protective clothing, branded uniforms with a permanent business logo, mileage at 45p per mile (first 10,000) or 25p thereafter, materials, accommodation and subsistence when working away from base, public liability insurance, trade body membership, accountancy fees, mobile phone and internet (business proportion) and use of home as office. Ordinary clothing, routine meals at a regular site, and personal expenses are not allowable.
Simplified mileage uses HMRC's flat rates — 45p per mile for the first 10,000 business miles, 25p thereafter. Actual costs claims the business-use percentage of fuel, insurance, repairs, road tax and capital allowances on the vehicle. Once a method is chosen for a vehicle, you must stick with it. Most trades with high mileage and an older vehicle do better on simplified; high-cost vans driven less may do better on actual.
Yes. NDCA is regulated by the ACCA (Association of Chartered Certified Accountants).
We are remote first. We work with construction firms across the UK using Xero, so location does not matter.
Yes. Book one on 01903 968618 or via the contact form.
Ready to hand over CIS and tax?
Most construction clients hand over the records once and we handle everything from there — monthly CIS, VAT, year-end. Send us a few details — we will come back within one working day with a fixed monthly quote.
