Quick Summary
- Builders who work for contractors are usually in the Construction Industry Scheme (CIS), which deducts 20% (or 30%) from labour payments.
- Subcontractors often get a CIS tax refund because deductions are taken before expenses are allowed for.
- If you pay subcontractors, you must file a CIS return every month by the 19th — even if you paid nobody.
- VAT-registered builders working for other contractors usually use the domestic reverse charge.
- Gross payment status lets you be paid without deductions if you meet the turnover and compliance tests.
Construction has some of the most complicated tax rules of any trade. CIS deductions, reverse charge VAT, vans, tools and materials all need handling correctly — and getting it wrong usually means either overpaying tax or facing penalties. Here is what a good construction accountant does for builders, joiners, plasterers, roofers and small building firms in Glasgow and Clydebank.
If you are a subcontractor
When you work for a contractor under CIS, they deduct tax from the labour part of your invoice and pass it to HMRC:
- 20% if you are registered for CIS
- 30% if you are not registered — so always register
- 0% if you have gross payment status
Those deductions are an advance payment towards your income tax and National Insurance. Because they're taken from your gross labour income — before your van, tools, fuel and other costs — most sole trader subcontractors have paid too much by the end of the year and are owed a refund. We cover this in detail in our CIS tax refund guide.
What we do for subcontractors:
- Check every CIS payment and deduction statement against what you were actually paid
- Claim all your allowable expenses — van, tools, materials you pay for, protective clothing, phone, training and insurance
- File your Self-Assessment return early so you get any refund as soon as possible after 5 April
- For limited company subcontractors, reclaim CIS suffered through the company's monthly payroll submissions
If you are a contractor paying subcontractors
Once you pay subcontractors for construction work, you are a contractor under CIS. Your duties include:
- Verify each subcontractor with HMRC before you pay them, to find out what rate to deduct.
- Deduct the right amount from the labour element of each payment (not materials, VAT or plant hire).
- File a monthly CIS return by the 19th of the following tax month. Tax months run from the 6th to the 5th.
- Pay the deductions to HMRC by the 22nd (if paying electronically).
- Give each subcontractor a statement of payments and deductions within 14 days of the end of the tax month.
Late CIS returns attract an automatic £100 penalty, rising to £200 after two months and more after six months — per return. If you have a month with no payments, tell HMRC you're inactive rather than just not filing.
VAT and the domestic reverse charge
Since March 2021, most construction services supplied between VAT-registered businesses within CIS fall under the domestic reverse charge. The subcontractor doesn't charge VAT on the invoice; instead the contractor receiving the service accounts for it on their own VAT return. It doesn't apply when you work directly for an end user, such as a homeowner or a business that isn't in construction.
Reverse charge often leaves subcontractors with VAT repayments, which can make monthly VAT returns worthwhile. Builders working mainly for homeowners need to watch the £90,000 VAT threshold closely, because adding 20% can affect their prices.
Gross payment status
With gross payment status, contractors pay you in full and you pay your tax through your return — a big cash-flow boost. You need to pass three tests:
- Business test — you run a construction business in the UK through a bank account
- Turnover test — for a sole trader, at least £30,000 of construction turnover in the last 12 months (excluding VAT and the cost of materials)
- Compliance test — your tax returns and payments, including VAT, have been on time
HMRC reviews gross payment status regularly, so one late return can cost you the status.
Sole trader or limited company?
Many builders start as sole traders and incorporate as profits grow. A limited company pays Corporation Tax at 19% to 25% and lets you pay yourself through salary and dividends, but brings more admin and costs. As a rough guide, it's worth reviewing once your profits regularly go above around £40,000 to £50,000. We'll compare the figures for you — see salary vs dividends.
Making Tax Digital for builders
From 6 April 2026, self-employed builders with turnover over £50,000 must keep digital records and send quarterly updates to HMRC. The threshold falls to £30,000 in April 2027. Note that it's based on turnover, not profit — so many sole trader builders are already in. Read our MTD guide.
Frequently Asked Questions
Do I need a specialist accountant as a builder?
It helps. Construction has its own rules — CIS deductions and returns, the VAT domestic reverse charge and gross payment status — that general accountants don't always handle well. A construction-savvy accountant makes sure you claim back every pound of CIS you're owed.
How much CIS tax is deducted from subcontractors?
20% for subcontractors registered with HMRC, 30% if not registered, and nothing if you have gross payment status. Deductions only apply to the labour part of the payment, not materials or VAT.
When is the monthly CIS return due?
By the 19th of the month following the end of each tax month. Tax months run from the 6th of one month to the 5th of the next. Payments to HMRC are due by the 22nd if paid electronically.
Does the VAT reverse charge apply to work for homeowners?
No. The domestic reverse charge only applies to supplies between VAT-registered businesses within CIS where the customer isn't the end user. Work for homeowners is charged with VAT in the normal way.
What can builders claim as expenses?
Common allowable expenses include van costs or mileage, tools and equipment, materials you buy, protective clothing, public liability insurance, phone costs, training, trade memberships and accountancy fees.
Construction Accountant in Glasgow
From monthly CIS returns to subcontractor refunds and reverse charge VAT, we keep builders compliant and paying no more tax than they owe.
Sardar Muhammad, AAT
Sardar is the founder of LimeTree Accounting Solutions, an AAT-accredited practice in Govanhill, Glasgow. He works with sole traders, tradespeople, landlords and small limited companies across Glasgow and Clydebank.
This guide is general information based on UK and Scottish tax rules as at 13 October 2026. It is not personal advice. Rates and thresholds change, so speak to us about your own situation.