Every contractor knows where the job is. Fewer know where the money is.
Busy isn’t the same as profitable. And profit doesn’t mean cash.
Ask a site manager how a job is going and you’ll get a straight answer in seconds. Ask what that contract is making today, not at final account, and the answer is usually vague. As specialist accountants for construction companies, based in Melton Mowbray, Leicestershire, and working with contractors across the UK, we close that gap. We handle CIS and construction VAT properly, and set up the job costing, work in progress and cash flow systems that show what every contract is really making, while there’s still time to act.
- ACCA accountants
- CIS & reverse charge VAT
- WIP & cost to complete
- Xero, QuickBooks, Sage & bespoke systems
What construction accountants handle
The parts of your finances a general accountant tends to miss.
CIS (Construction Industry Scheme)
Registering, verifying every subcontractor before you pay them, deducting at the right rate and filing monthly returns. And, as a subcontractor, getting back what’s been deducted from you.
How we helpWe run CIS for you, file returns by the 19th and make sure deductions suffered are offset or reclaimed, not left with HMRC. CIS explained ↓
VAT & the domestic reverse charge
Reverse charge on CIS work between VAT-registered businesses, plus the different VAT rates for new homes, conversions and renovations.
How we helpWe check each contract so every invoice carries the right VAT, and plan for the cash effect. Construction VAT ↓
Job costing & cost to complete
Labour, materials, plant hire, subcontractors and preliminaries tracked contract by contract, not lumped into one company total.
How we helpMonthly margin by contract, with the cost to complete challenged every month by someone who understands the job. The numbers that matter ↓
WIP, applications & retentions
Valuing work done but not yet applied for, tracking applications through certification to cash, and chasing retentions when they fall due.
How we helpWIP valued consistently every month, and a retentions schedule with amounts, due dates and someone following them up. Cash tied up on site ↓
Payroll for mixed workforces
Employees on PAYE alongside self-employed subcontractors under CIS, with overtime, travel and site allowances.
How we helpPayroll and CIS run side by side, and we help you get worker status right, because misclassifying people is costly. Payroll & CIS services →
Most accountants cover the tax returns. We build the systems behind them.
Does any of this sound familiar?
Start with the hard questions.
Order book full, three sites running. So why is the bank balance so tight?
Your money isn’t in the bank. It’s out on site, in work not yet applied for, applications not yet certified, and retentions.
Site knows where the job is. Nobody knows what it’s making.
By the time the job is properly costed it’s finished, and the chance to protect the margin has gone.
We did the extra work on a nod and never got paid for it.
Every unsigned variation is an argument you’ll have later, from a weaker position, with the money already spent.
The subbies and merchants want paying on Friday. The certificate isn’t due for weeks.
Payroll doesn’t wait for certification. Without a forecast, every week becomes a firefight.
Month-end takes three weeks, so problems reach the office far too late.
On a twenty-week contract, a three-week delay is most of a phase gone before anyone can act.
We’re winning more work, but cash keeps getting tighter.
Every new contract needs labour, plant and materials funded before a penny is certified. Growth can make it worse.
Your money isn’t in the bank. It’s sitting out on site.
The numbers that matter for contractors
The few numbers you can genuinely influence, measure and improve.
Margin by contract, monthly
Not the margin you tendered, but what each job is earning now. One loss-making contract can wipe out the profit from three good ones.
Cost to complete
Your accounts show what you’ve spent. The real question is what it will cost to finish. Carrying forward last month’s estimate hides problems.
WIP and over- or under-billing
Work done but not applied for is cost you’re funding. Money received in advance is money you’ll need to finish the job.
Variations and change control
Agree the scope and price in writing before you start. Otherwise it’s work you’ve paid for and may never be able to invoice.
Retentions
Often 3–5% of turnover is held by others. Knowing it’s owed isn’t enough: you need an amount, a due date and someone chasing it.
Application-to-cash days
Measure the whole journey: application, certificate, payment. The gap between the contract and reality is your real funding need.
Labour recovery
Hours paid against hours allowed in your prices. Travel, waiting, weather and return visits all cost money you can’t recharge.
Preliminaries against programme
Welfare, scaffold, plant and supervision are priced once but spent every week. Delays quietly eat your margin.
Secured workload and pipeline
Work won, tenders pending and your win rate. You’re busy today, but will you have enough work in six months’ time?
Cash tied up on site
How much of your money is out on site?
Construction records more company insolvencies than any other UK sector, and most failures come down to cash, not workmanship. On £3m turnover with a 5% retention, £150,000 of a year’s work is held back. And every day faster from application to cash releases about £8,200. Get paid 15 days sooner and that’s another £123,000 in your bank. Try your own figures.
Illustration only. Retention held = turnover × retention rate. Cash released = turnover ÷ 365 × days, excluding VAT, as most subcontract work falls under the reverse charge. Insolvency figures: Insolvency Service, 12 months to July 2026.
One set of numbers
When site, commercial and finance work from the same numbers, the arguments stop
The single biggest lever costs nothing. When the estimator, buyer, contracts manager and finance all see the same figures, the estimator stops pricing from old labour rates, buying sees what a call-off is doing to working capital, and the contracts manager learns a job has slipped early in the month, not at final account.
- Month-end closed in days, not weeks
- WIP valued the same way every month
- Cost to complete challenged on every live contract
- Job costing that talks to your accounts, applications and subcontract ledger
CIS explained
Contractor, subcontractor, or both?
The Construction Industry Scheme isn’t an extra tax. It’s a way of collecting a subcontractor’s tax and National Insurance in advance: the contractor deducts it from each payment and passes it to HMRC.
A contractor is hired by the client and pays subcontractors for construction work. A subcontractor is engaged by a contractor, not the client. Many businesses are both, for example a groundworker who also takes on its own labour, and must register as both. A business outside construction becomes a “deemed contractor” once it spends more than £3m on construction work in 12 months.
As a contractor, you must
- Register with HMRC before you pay your first subcontractor
- Verify every subcontractor with HMRC before you pay them
- Deduct at the right rate and pay it over to HMRC
- File a monthly return by the 19th, confirming the subcontractors aren’t employees
- Keep full records, and tell HMRC about changes to your business
| Subcontractor’s CIS status | Deduction | What it means |
|---|---|---|
| Registered for CIS | 20% | Deducted from the labour element of each payment and counted towards their tax and National Insurance. |
| Not registered | 30% | The higher rate applies, which hurts their cash flow badly. Registering is usually the obvious first step. |
| Gross payment status | 0% | Paid in full, and they pay their own tax later. A huge working capital advantage that has to be earned and kept. |
Usually within CIS
Site preparation, building, alterations and repairs, decorating, demolition, installing heating, lighting, power, water and ventilation systems, and cleaning inside buildings after construction work.
Usually outside CIS
Architecture and surveying, carpet fitting, making and delivering materials, scaffold hire without labour, and site facilities such as canteens.
Getting and keeping gross payment status
HMRC looks at your tax compliance record and turnover over the last 12 months, excluding VAT and materials. Sole traders need at least £30,000. Partnerships and companies need £30,000 per partner or director, or £100,000 in total (where five or fewer people control a company, £30,000 each). Getting paid gross instead of net of 20% transforms your cash position, so keeping a clean compliance record is worth building into how you run the business.
A general guide based on current HMRC guidance. Every contract is different, so talk to us about yours.
Construction VAT
The reverse charge, and the right rate on every job
When a VAT-registered subcontractor supplies work covered by CIS to a VAT-registered contractor, the contractor accounts for the VAT, not the subcontractor. It doesn’t apply when you work direct for an end user, such as a homeowner or a developer who tells you in writing that they’re the end user. Many subcontractors now reclaim more VAT than they pay, so monthly VAT returns can bring refunds in faster.
The rate also depends on the work. Charge 20% where you needn’t and you’re uncompetitive. Charge 0% or 5% where 20% was due and you’ll fund the difference from your own margin, plus penalties and interest.
| Type of work | Usual VAT rate |
|---|---|
| Building a new home (new dwelling) | 0% |
| Converting a non-residential building into homes, or renovating a home empty for at least two years | 5% |
| Installing energy-saving materials, such as solar panels, insulation and heat pumps, in homes (until 31 March 2027) | 0% |
| Most other work, including repairs, extensions and commercial projects | 20% |
Conditions apply to each rate, and getting the evidence right matters, so check with us before you quote.
Building or refurbishing property
Homes or commercial units: we know the tax and VAT rules that decide your profit
Whether you build or refurbish to sell, to let or to use yourself, the VAT treatment depends on what the property is and what you do with it. Get it right at the start and VAT is just a cash flow item. Get it wrong and it becomes a cost you can’t recover.
Homes and dwellings
- Selling a new home you built, or granting a lease of over 21 years, is usually zero-rated, so you can reclaim the VAT on your build costs.
- Converting a commercial building into homes can also qualify for zero-rating on the first sale, and the conversion work itself is often charged at 5%.
- Letting homes is exempt, so VAT on building or refurbishing them to rent usually can’t be reclaimed. That’s where partial exemption bites.
- Building your own home? The DIY housebuilders scheme can refund VAT you’ve paid.
Commercial units
- Selling or letting commercial property is normally exempt from VAT, which blocks recovery of the VAT on your costs.
- Opting to tax makes your sales and rents standard-rated, so you can reclaim that VAT. HMRC must be told within 30 days, and the option usually lasts 20 years.
- Selling a new commercial building, under three years old, is standard-rated anyway.
- The option to tax doesn’t apply to homes, and needs HMRC’s permission if you’ve already made exempt supplies of the property.
Built it but can’t sell it?
We see this a lot. The market turns, a buyer pulls out or a commercial unit sits empty, and the obvious answer is to let it until things improve. Done without planning, that can create tax bills and legal problems you didn’t expect.
- Corporation tax: moving a property out of trading stock and into a lettings portfolio is usually treated as selling it to yourself at market value. That can create a tax bill on profit you haven’t received in cash.
- VAT on homes: letting a new home you meant to sell is exempt, so some of the VAT reclaimed on the build may have to be repaid. A temporary let while you’re still genuinely trying to sell is treated more lightly than a permanent change.
- VAT on commercial units: without an option to tax, letting is exempt and VAT already reclaimed can be clawed back. On projects of £250,000 or more, the Capital Goods Scheme keeps adjusting for ten years.
The legal side
- Finance: development loans rarely allow letting, so you may need your lender’s consent or a refinance onto a term or buy-to-let loan.
- Tenancies: since 1 May 2026 in England, residential tenancies roll month to month, and you can’t use the selling ground to get the property back in the first 12 months. A let can hold up a sale for longer than you think.
- Landlord rules: deposit protection, gas and electrical safety checks, an energy performance certificate and any local licensing apply from day one.
- Structure: holding lettings inside your trading company can affect valuable reliefs on a future sale or on inheritance.
We also look at the wider tax picture: whether a project is trading stock or an investment, Stamp Duty Land Tax on the purchase, whether to use a separate company for each site, and land remediation relief and capital allowances where they apply.
A general guide based on HMRC’s VAT Notices 706, 708 and 742A. Conditions apply to every relief, so talk to us before you buy, build or let.
Don’t leave tax reliefs on the table
Construction is better served by the UK tax system than most contractors realise.
R&D tax relief
No laboratory needed. Solving a genuine technical problem, such as difficult ground conditions, an unusual structural solution, new materials, offsite methods or hitting an energy standard nobody on the job had met before, can qualify.
How we helpThe rules and evidence requirements have tightened, so we assess each project properly rather than assume either way.
Capital allowances
Full expensing, the £1m Annual Investment Allowance and the new 40% first-year allowance cut the real cost of plant, machinery and vans. The structures and buildings allowance gives 3% a year on commercial buildings.
How we helpWe also look for embedded fixtures in commercial property you’ve bought, often worth a great deal and rarely claimed. Capital allowances explained →
Land remediation relief
Companies cleaning up contaminated or long-derelict land can deduct 150% of qualifying costs, and loss-makers can claim a cash credit. Widely missed by developers taking on difficult sites.
How we helpThe government is reviewing this relief, so we’ll check the current rules and timing before you commit to a site.
The pressures on UK construction, and where finance helps
You can’t control the market. You can control how ready your numbers are for it.
Cash flow & insolvency
Construction has more company insolvencies than any other UK sector, usually triggered by late payment and cash running out.
What helpsA weekly 13-week forecast, and choosing clients on their payment record, not just contract value.
Skills shortages
An ageing workforce and too few apprentices push up labour costs and slow jobs down.
What helpsLabour recovery tracked by job, so you price for the team you actually have, and rewards that keep your best people. Keeping your team ↓
Material costs
Price swings and supply delays can turn a profitable tender into a loss before the job starts.
What helpsCost to complete updated monthly, quotes based on today’s prices, and fluctuation clauses where you can get them.
Regulation
The Building Safety Act, Part L energy standards and stronger payment reporting all add cost and paperwork.
What helpsCompliance costs priced into tenders and tracked against budget, with records that stand up to scrutiny.
Net zero & sustainability
Public and larger private clients increasingly ask for carbon data and low-carbon methods when they award work.
What helpsCarbon tracked alongside cost, and a clear business case before investing in retrofit or offsite capability.
Keep your best people, and keep payroll right
With skilled labour this hard to find, how you pay and reward your team matters as much as what you pay.
Payroll, CIS & employment
Weekly, fortnightly or monthly payroll, payslips, RTI submissions to HMRC, starters and leavers, and auto-enrolment pensions, run alongside your monthly CIS returns and subcontractor statements. And our fees are tax deductible.
Our payroll and CIS services →Rewarding your team tax-efficiently
Bonus schemes tied to targets you choose, such as labour recovery or jobs finished on budget, salary sacrifice, EMI share options for key people, and Employee Ownership Trusts if you plan to step back.
Ideas for rewarding your staff →Your Virtual Finance Office
A full finance team without the £240k salary bill
To grow properly, a contractor needs every one of these skills. Most can’t justify them all full-time, so a bookkeeper ends up covering FD work, or a financial controller ends up doing CIS returns and supplier payments.
Our Virtual Finance Office gives you the whole team, often for less than the salary of one full-time junior. If you already have good people, we work with them and fill the gaps.
Average UK salaries, indeed.com.
Who we work with
Owner-managed construction businesses that want more than annual accounts and VAT.
Main contractors
Running several contracts at once, with subcontract ledgers, applications, retentions and CIS to control.
Housebuilders & developers
Funding sites, valuing work in progress, VAT on homes and commercial units, partial exemption, the option to tax, and reliefs such as land remediation.
Subcontractors & trades
Bricklayers, roofers, groundworkers, plumbers, electricians, plasterers, renderers and landscapers dealing with CIS and the reverse charge.
Virtual Finance Office
Bookkeeping, CIS, VAT, payroll, payment runs and job-costed management accounts. The foundations everything else is built on.
Find out more →Virtual Finance Director
Part-time finance leadership. Forecasting, cash, funding, pricing strategy and a monthly board meeting.
Find out more →Financial freedom & exit
Build a more valuable business, plan your exit and protect your family if the unexpected happens.
See packages →Josef, founder of Blueski, has worked as a Finance Director in construction and manufacturing, and as a Company Accountant in shopfitting firms. He knows the gap between the site, the QS and the bank balance from the inside. Monthly WIP reporting he introduced helped one housebuilder cut £2.5m from the build cost of a single site.
Questions contractors ask us
What does a construction accountant do that a general accountant doesn’t?
We go beyond year-end accounts and tax. We run CIS and construction VAT correctly, cost every contract, value work in progress monthly, track applications, retentions and variations, and build a 13-week cash forecast tied to certification dates, so you know what each job is really making while there’s still time to act.
Do I need to register for CIS?
If you pay subcontractors for construction work, you must register as a contractor before you pay the first one. Subcontractors don’t have to register, but if they don’t, 30% is deducted from their payments instead of 20%. A business outside construction must also register once it spends more than £3m on construction work in 12 months.
Can I be both a contractor and a subcontractor?
Yes, and it’s very common. If you’re engaged by a contractor and also pay your own subcontractors, you’re both, and you need to register as both. That means suffering deductions on the work you do and making deductions on the people you pay.
How do I get CIS gross payment status?
HMRC looks at your tax compliance record and your construction turnover over the last 12 months, excluding VAT and materials. Sole traders need at least £30,000. Partnerships and companies need £30,000 per partner or director, or £100,000 in total. Once you have it, late filing or late payment can put it at risk, so compliance needs to run like clockwork.
Does the VAT domestic reverse charge apply to me?
It applies when a VAT-registered business supplies construction services covered by CIS to another VAT-registered business that will sell them on. It doesn’t apply to supplies to end users, such as homeowners, or to businesses that tell you in writing they’re the end user. We review your contracts so every invoice is right.
What VAT rate applies to new homes, conversions and renovations?
Building a new home is usually zero-rated. Converting a non-residential building into homes, or renovating a home that has been empty for at least two years, is usually 5%. Installing energy-saving materials in homes is zero-rated until 31 March 2027. Most other work, including repairs, extensions and commercial projects, is 20%. Conditions apply, so check before you quote.
Are white goods and fitted wardrobes in a new home zero-rated for VAT?
Usually not. When you build a new home, only “building materials” share its zero rate. Kitchen units and worktops count, and so do appliances that heat space or water, provide ventilation such as extractor fans, or act as alarms. But other electrical and gas appliances, including integrated ovens, hobs, fridges, freezers and dishwashers, are excluded, as are fitted wardrobes and other fitted furniture outside the kitchen, and carpets. A builder must charge 20% on excluded items, and a developer can’t reclaim the VAT on them, even though the house itself is zero-rated. Free-standing appliances and furniture aren’t part of the building at all, so they’re treated separately again. Simple storage, such as an under-stair cupboard or an alcove closed off with a door, a shelf and a rail, can still count as a building material, so the detail matters.
How do you account for retentions and stage payments?
Stage payments and applications are matched to the work actually done each month, through work in progress, so profit isn’t distorted by invoice timing. Retentions are recorded as money owed to you, with a schedule of amounts and release dates, so someone chases them when they fall due.
Can construction companies claim R&D tax relief?
Often, yes. Solving a genuine technical problem, such as difficult ground conditions, a new structural solution, new materials or offsite methods, can qualify, even if the answer was found on site. The rules have tightened, so each project needs proper assessment and evidence.
Do you only work with contractors near Melton Mowbray?
No. We’re based in Melton Mowbray, Leicestershire, and work with construction companies across the UK using cloud accounting software such as Xero and QuickBooks, and regular video calls. We’re happy to visit your office or site too.
How much does a construction accountant cost?
It depends on what you need, from CIS, VAT and bookkeeping to monthly job-costed management accounts and a part-time finance director. After a free 30-minute call, we send you a fixed monthly fee, so there are no surprises.
Can I reclaim VAT when I build or refurbish property?
It depends on what you do with it. Selling a new home you built is usually zero-rated, so the VAT on your costs can be reclaimed. Letting homes is exempt, so that VAT usually can’t be. Commercial property is normally exempt unless you opt to tax. If you do both taxable and exempt things, partial exemption rules decide how much you can reclaim, and for projects of £250,000 or more the Capital Goods Scheme can adjust it for up to ten years.
What is the option to tax, and should I opt?
Opting to tax a commercial property makes your sales and rents standard-rated, so you can reclaim the VAT on buying, building or refurbishing it. You must tell HMRC within 30 days, and it usually lasts 20 years. It suits most commercial landlords and developers, but it adds VAT to your rents and sale price, which matters if your tenants or buyers can’t reclaim VAT, so we look at who they are before you decide.
What happens if I build or refurbish a property and can’t sell it?
Letting it instead is often the obvious answer, but it needs planning. Moving a property from trading stock into a lettings portfolio is usually treated as a sale to yourself at market value, which can create a tax bill without any cash. Some VAT reclaimed on the build may have to be repaid, development lenders rarely allow letting, and since 1 May 2026 in England new tenancies roll month to month, so a let can hold up a later sale. We model the options and work with your solicitor and lender before you decide.
Run your contracts. Don’t let your contracts run you.
Find out before it costs you.
Book a free 30-minute call with Josef. We’ll look at your latest figures and tell you what they’re not telling you. No charge, no obligation. Or get our free e-book below.
Free e-book
The 8 Numbers Every Business Should Know & Track
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T: 01664 774041 · M: 07887 921705 · E: Sales@MrBlueski.co.uk
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