Construction Industry Accounting

Should I use a Limited Company?

A limited company is a legally registered legal entity that is limited to shares. Limited implies that all shareholders are responsible for all debts incurred by the company. A business partner’s liability is limited to the amount of money they have invested in the company.

In most cases, a Limited Company is created in which two or more individuals combine and form a partnership. That is, they can conduct business as co-owners. We give tax suggestions and how you can use tax benefits such as the entrepreneur’s relief to incorporating your business. Good construction industry accountants will be able to advise you on the best structure for your business.

Construction industry accounting is a service that works well for everything from large development firms, concrete companies, to small mom and pop handyman jobs and fuel tank testing services.

Does IR35 apply to the construction industry?

IR35 is a government enactment pointed toward preventing agreement and independent labourer’s from paying diminished duty by offering their types of assistance through a restricted organization. The key here for temporary workers is to concede to terms and conditions with the customer ahead of time of beginning your commitment that places you outside of IR35.

Do I need to register for VAT?

If you estimate that the company’s turnover during the fiscal year (12 months) is less than 80,000 GBP, the company will not be registered in the VAT register. The estimation should be done with caution, because if you have a high turnover this fiscal year, you may need to pay VAT later. If you later discover that the turnover exceeds 80,000 GBP

  • Register now in the VAT registration
  • Pay VAT for the entire fiscal year, including possible late fees and interest.
  • Report the self-assessed taxes for the entire year.

If your business is involved in many acquisitions that include VAT, you can voluntarily register in the VAT register. After registering in the VAT register, you can deduct VAT purchased for commercial purposes. See our guide to VAT for more info

Risk points of the input tax deduction for “Project A”

The construction industry enterprise signs a construction contract with the contracting party (hereinafter referred to as Party A). The contract stipulates that Party A shall provide the materials, equipment, and power required for construction, and deducts the engineering payment payable to the construction industry.

According to the “Implementation Rules of the Provisional Regulations on Value-Added Tax”, compensation refers to obtaining currency, goods, or other economic benefits from the purchaser. Party A’s use of goods to offset the project payment is considered to obtain other economic benefits. This behaviour is a paid sale, and value-added tax shall be calculated and paid. When construction enterprises obtain relevant tax deduction vouchers, their input tax can be deducted in general tax calculation.

In practice, some Party A did not levy a value-added tax or issue invoices for the above-mentioned “Material A” deducted from the project cost. The construction enterprise has not obtained the input tax, and the value-added tax is calculated and levied according to the full amount of the project. It is recommended that construction enterprises should indicate in the contract that they require special value-added tax invoices for deducting the “A supply of materials” part of the project cost to deduct the input tax.

How does CIS affect my business?

HMRC requires that contractors deduct money from a subcontractor’s payments and pay it across to HMRC known as the construction industry scheme. Contractors are required to register. Subcontractors are not required to, however their deductions may be at a higher rate if they do not register.