Giving construction firms and contractors the power and tools to focus on projects whilst we focus on the accountancy compliance.
Introduction to the Construction Industry Scheme (CIS)
Being a construction firm you have probably heard alot of people talk about the wonderful world of CIS tax. This scheme covers all construction work in the UK including jobs or projects involving:
• Site preparation
The UK includes UK territorial waters up to the 12 mile limit.
The scheme doesn’t apply if you are a UK business doing construction work overseas. However, if you are a non UK business and completing construction work in the UK, the scheme will apply to you. As a result, you must register accordingly.
What to do as a Contractor
Your company will be a contractor if it pays subcontractors for construction work.
All contractors must register with HMRC for the CIS scheme and each month contractors must send HMRC a complete CIS tax return. The CIS tax return will record all the payments the contractor has made under the scheme including any no payments. The CIS return will include:
• Details of the subcontractors you have used
• Details of the payments you have made to subcontractors and any deductions withheld
• A declaration that the employment status of all subcontractors has been considered by the contractor
• A declaration that all your subcontractors that needed to be, have been verified
The contractor will then need to make payment to HMRC by the 22nd of each month.
What to do as a subcontractor
As a construction firm, you could also be a subcontractor. A subcontractor business carries out work for a contractor.
Firstly, you must notify HMRC that your business is also a subcontractor and provide your Unique Taxpayer Reference (UTR) number to your contractor so that they can verify you. The contractor will then deduct the correct level of CIS tax and withhold this from you.
Secondly, you need to make sure that you receive the correct documentation from your contractor i.e. CIS tax deduction voucher for your firm’s tax records.
Lastly, assuming the construction firm is a Limited company, you will then be able to offset the tax deducted through CIS when you deal with your Corporation Tax return.
Can my construction firm be a contractor and a subcontractor?
When you work as a contractor, you must follow the contractor rules. When you work as a subcontractor, you must follow the subcontractor rules.
The key is recording and knowing when you are operating as a contractor and when you are operating as a subcontractor.
HB Associates can register you as a contractor and a subcontractor and also prepare and file your CIS tax return.
Construction company accounting
We offer the following services to Limited Companies:
• Year end accounts
• Corporation tax
• Company Secretarial matters including company incorporation, share structures and transfers
• CIS tax return
• Payroll, auto enrolment and P11ds
• Tax planning and dividend planning
However, as a construction company you may wish to consider some unique concepts that reflect the requirements of the construction industry through construction company accounting.
Firstly, most construction firms will run multiple projects at once and will need to know if an individual project is profitable or not. This is where your accounting system plays a huge part!
Most importantly, before you can begin to work out job costings, you need to make sure your underlying accounting systems are equipped to be able to track and filter this information to you easily. This is where Xero comes in!
Xero is a cloud based accounting software which will allow you to track projects! Therefore, your company will have all its accounting records in one place and be able to split the information by individual projects. In addition, you will be compliant from an accounting perspective.
We offer set up and training in Xero so that we can help you and your staff get the best information out of your accounting system. After that, you will then have the basics correct to job cost, calculate contract retainage and work out your work in progress to bill your customers.