PLA

PLA-Logo-dark

Accountants for Builders: How Construction Tax Planning Services Works

Anyone operating as a contractor or subcontractor in the mainstream UK construction business should know the Construction Industry Scheme (CIS), which was established to reduce the incidence of tax evasion in the UK’s construction industry. 

Her Majesty’s Revenue and Customs (HMRC) require all contractors enrolled in the Construction Industry Scheme to withhold 20% of all payments. These reductions will then be applied to your tax and National Insurance payments. However, contractors can legally withhold 30% of your income if you don’t sign up for the scheme.

Work of accountants

Once registered, your contractor must file monthly CIS returns to HMRC and present you with a CIS voucher or certificate verifying the deductions.

CIS registration is additional work that could take time away from other administrative duties in your construction company. 

Thankfully, you can rely on assistance from Pearl Lemon Accountants for these types of work.

Get professional support with construction tax planning. Book a call with us.

Everything You Have to Know About CIS

The purpose of the Construction Industry Scheme (CIS) was to reduce the amount of unreported or unpaid tax in the United Kingdom attributable to subcontractors working in the construction industry.

Tax Credits and Tax Relief for Construction Sector

In the construction industry, our focus is more often on the aesthetic outcomes of our labours than on the engineering developments that make them possible. Research and development, however, takes care of the conception, development, and completion of such projects.

It might be difficult for companies to determine whether or not their innovative project is eligible for R&D Tax Credits; nevertheless, all they need to do is provide evidence that the project is advancing science or technology in a meaningful way.

No matter how little, any project that solves a significant technological or scientific issue is acceptable. Our R&D tax credit experts at Pearl Lemon will help clear up any confusion you may have and soon help you reduce your construction company’s tax liability.

Young serious pregnant accountant sitting by desk in front of laptop
Smiling young businesswoman holding house model. Accounting, property investment concept.

The Consequences If You Missed Payments

If you are the contractor and fail to withhold the correct amount of tax from your subcontractors or report your subcontractor payments to HMRC properly, you could be fined up to £3,000.

Tax returns for a given month (say, May) must be submitted by the 19th of the following month (June). Penalties for late returns begin at £100 each day past the deadline.

Registration to CIS

Registration with HMRC for the CIS system is required for two sorts of individuals:

Let’s start with the subcontractors. You must sign up with HMRC as a subcontractor if you are to be paid by a building contractor for construction work.

One can accomplish this in a couple of ways:

You can register for CIS online using the “Government Gateway,” or you can call HMRC’s CIS helpline (0300 200 3210) and provide your UTR or the UTR of your company if registering as a business. Other required information is your National Insurance number and, if applicable, your VAT number. A confirmation from HMRC will be sent to you shortly.

Then, if you’re self-employed, your contractor will need your National Insurance number and your UTR or your business’s NI and UTR (if you are trading as a company). Next, the contractor checks your CIS enrollment status over the internet. If you are registered, they will deduct 20% from your invoice (excluding VAT and materials). They should withhold 30% if you are not enrolled in the CIS scheme.

Two young women in the office, working together from the computer.
Confident young business woman working with laptop sitting in the office.

Deductions made from income tax, corporate tax, or PAYE/NI payments made by you as an employer are credited back to you when the tax return is filed.

Another sort of subcontractor registration with the CIS is as follows: The Gross Payments Scheme allows you to receive payments from Contractors without having CIS tax withheld if your annual revenue is more than £30,000 (or £30,000 per Partner in a partnership or director of your firm. Like the first one, you can enrol for this scheme over the phone or online.

Also, contractors must register in the CIS scheme.

Typically, this is done during the PAYE registration process. Simply check the box with the question, “will you be engaging any subcontractors in the Construction Industry?”

If you are currently enrolled for PAYE but need to register as a Contractor under the CIS system, you should phone the CIS helpdesk (0300 200 3210) and explain your situation. Simply provide the necessary details (such as your PAYE reference and UTR number), and HMRC will update its records to match your registration.

Types of Construction Businesses Covered By CIS

The CIS applies to all building projects within the United Kingdom up to its 12-mile territorial waters limit. Work on buildings outside of the UK is exempted from the scheme. However, any foreign firm seeking to participate in UK construction projects must adopt the scheme.

It encompasses sole proprietorships, partnerships, corporations, and any other business structure in the construction industry.

CIS-eligible types of work include:

  • Site preparation
  • Demolition
  • Alterations
  • Construction 
  • Dismantling 
  • ‍Decorating
  • Repairs
Accounting Questions and Answers, How Solve Accounting Problems. Accountant looking to question mark
Financial advisors reviewing accounting documentation in office workspace

However, if you just carry out the following jobs, you will not be required to register:

  • Architecture and surveying
  • Delivering construction materials
  • Scaffolding hire (with no labour)
  • Carpet fitting
  • Fabricating construction materials, including plant and machinery
  • Non-building work done on construction sites, like managing the canteen or the laundry room

Exemptions for the CIS

For several types of business work, the scheme is optional. Possible examples of this are:

  • Payment for the labour executed on a subcontractor’s property
  • Payments that the local education agency allocates to the school’s governing body or the principal to complete construction projects
  • ‍Charity or trust-funded projects
Calculating Tax
Financial accountant working on the laptop at the office desk

Ways to Avoid the Hassles

When you work with Pearl Lemon Accountants, you can put all your worries to rest.

If you need help getting in compliance with HMRC, our tax specialists will handle accounting and tax affairs and file all tax returns on schedule for you. We’ll verify the tax status of all subcontractors and remit tax payments to the UK government on your behalf.

Need this kind of help? Contact us now.

Our Tax Planning and Accounting Services For Construction Companies

Pearl Lemon Accountants provides their clients access to a team of expert accountants who will proactively evaluate your construction tax assessments. Read on to learn more about our accounting services.

Corporate Tax Services

Pearl Lemon Accountants offers advice and assistance with taxation, including UK tax policy, tax reform, legislation, and registration. We’re here to help you file your business taxes in the most tax-efficient way.

You must be prompt and accurate in all of your transactions with HMRC. We provide a full range of corporate tax compliance services, including preparations of tax return preparation for businesses large and small, support with HMRC’s electronic return filing requirements, and guidance on making the most of available tax exemptions and allowances.

Young focused asian accountant analyzing accounting chart while reviewing finanacial documentation.
Work of accountant in the company close up photo

Payroll Services

No matter the size of your business, we can help you manage payroll with our innovative payroll services. 

As laws and regulations are constantly being updated, your business must access knowledgeable, all-encompassing back office payroll support to ensure its payroll is always in line with the latest regulations.

HMRC Tax Investigations Advice

While an HMRC tax inquiry can be a stressful experience for any business, Pearl Lemon Accountants can help you complete the process efficiently. Our tax experts are familiar with all parts of HMRC tax investigations and can provide reliable advice and support as you encounter or prepare for one.

Papers of accountant
Young accountant

VAT Accounting Services

No matter how long or short your company has been in business, our VAT accountants are here to assist you with registration, selecting a VAT scheme, computing VAT, and reconciling VAT accounts.

Businesses in diverse industries have benefited from Pearl Lemon’s accountancy services. Pearl Lemon Accountants has extensive knowledge in construction tax planning. If you are worried about construction-related taxes, our team of qualified accountants is here to help.

Want to know more about what we can provide? Send us a message.

Building Your Tax Plan Now

Regulations regarding corporate taxation are complicated and constantly changing. The key to reducing your company’s tax liability is proactive tax preparation. 

Tax experts at our company are highly qualified and commercially minded, which means that we are capable of reducing your tax bill to a minimum.

Whether you are setting up your company for tax efficiency or reducing your tax obligations, Pearl Lemon Accountants will help you.

So if you want to experience that hassle-free tax planning strategy for a better business flow, then book a call now.

Young female accountant or financial analyst sitting in front of computer

FAQs

The contractor must pay any sales, consumer, use, or other construction-related taxes required by local law.

You may need to show proof of your CIS deductions or submit an adjusted claim to HMRC. If you fail to respond by the given deadline, HMRC will make the necessary adjustments to your claim, and you will not be eligible to submit any further claims for that tax year.

CIS is a tailored tax scheme for the construction industry alone. Site preparation, repairs, decorating, and demolition are just some of the many construction jobs covered in CIS. While some exemptions may exist, the scheme is typically required for all general contractors.

It may just take a few days if you are already registered as self-employed. More time is required if you intend to register as self-employed and must therefore register. Obtaining a UTR number and registering as self-employed can take up to ten days.

Here at Pearl Lemon Accountants, we offer the services that best suit gamblers such as yourself.

So what are you waiting for? Book a call now.