Why Builders Need a Different Kind of Accountant

If you run a building, roofing, or construction business in the UK, your tax and compliance needs are not the same as a typical limited company director or sole trader. The Construction Industry Scheme (CIS), VAT on materials versus labour, payroll for site workers, and the constant risk of HMRC compliance checks all add layers that general accountants often miss.

A specialist accountant for builders understands these specific rules. They know how to structure your payroll to minimise employer National Insurance. They handle CIS returns and monthly deductions without you having to chase HMRC for refunds. And they spot VAT pitfalls that could cost you thousands if you get them wrong.

We are Holloway Davies, an ICAEW qualified accountancy firm. We work with builders, contractors, and construction businesses across the UK. This article explains what a specialist accountant for builders actually does, what to look for when choosing one, and how the right advice saves you money.

What the Construction Industry Scheme (CIS) Means for Your Business

CIS is the tax deduction system that applies to most construction work in the UK. If you are a contractor (someone who pays subcontractors), you must deduct 20% from most subcontractor payments and send that money to HMRC. If you are a subcontractor, the contractor deducts the 20% from your invoices before paying you.

Many builders are both contractors and subcontractors at different points in the same week. You might be the main contractor on a kitchen extension in Birmingham, paying a plasterer and an electrician through CIS. Then you sub to a larger developer on a new-build site in Solihull, where they deduct CIS from your invoice.

A good accountant for builders will:

  • Register you with HMRC for CIS if you are a contractor for the first time.
  • Run monthly CIS returns (the CIS300 form) to report payments to subcontractors.
  • Reconcile the CIS deductions you have suffered against the deductions you have made.
  • Claim back any overpaid CIS on your behalf through your Self Assessment or company tax return.
  • Make sure you are not paying CIS on labour-only subcontractors when you should be running them through payroll instead.

The last point is a common mistake. If a subcontractor works for you full-time, with set hours and your tools, HMRC may argue they are an employee, not a subcontractor. That means you owe employer NI, pension contributions, and holiday pay. A specialist accountant spots this before HMRC does.

VAT on Building Work: The Big One That Costs Builders Thousands

VAT is where most construction businesses lose money unnecessarily. The rules are specific, and the rates differ depending on what you are building, who you are building for, and whether the property is new or existing.

The standard VAT rate for construction work is 20%. But there are exceptions. New-build residential properties qualify for a 0% VAT rate on most construction services. Renovations of properties that have been empty for two years or more may qualify for a reduced 5% rate. Conversions of commercial buildings into residential properties also attract the 5% rate.

If you are a sole trader or partnership, you can register for the Flat Rate Scheme for VAT. Builders typically use a 14.5% flat rate (reduced to 11% in the first year). But the limited cost trader rules mean many builders cannot stay on the flat rate because they spend too much on materials. Your accountant should calculate whether the flat rate or standard VAT accounting works better for your specific business.

A specialist accountant for builders will:

  • Check whether you should be charging 0%, 5%, or 20% on each job based on the property type and client.
  • Make sure you have the right VAT certificates and evidence to support reduced rates if HMRC asks.
  • Calculate whether the Flat Rate Scheme or standard VAT accounting saves you more money.
  • Help you reclaim VAT on materials, tools, plant hire, and subcontractor costs.
  • Advise on whether voluntary VAT registration makes sense before you hit the £90,000 threshold.

One example. A roofing contractor in Leeds we worked with was charging 20% VAT on all his work. He did not realise that most of his jobs were on new-build housing estates, which should have been 0%. Over two years, his customers had paid roughly £28,000 in VAT they should not have paid. His customers were unhappy, and he nearly lost a contract with a major developer. We sorted the VAT position, issued credit notes, and he now charges the correct rate. His accountant before us was a generalist who simply did not know the construction VAT rules.

Payroll for Builders: CIS, RTI, and the Holiday Pay Trap

If you employ site workers directly, you must run payroll through Real Time Information (RTI). That means reporting pay and deductions to HMRC on or before each pay day. You also need to handle CIS deductions for subcontractors, which is separate from payroll.

The trap many builders fall into is treating someone as a subcontractor when they are really an employee. HMRC has been actively targeting construction businesses for employment status checks. If they decide your subcontractors are actually employees, you could owe backdated employer NI, PAYE, and pension contributions for several years, plus penalties.

A specialist accountant for builders will:

  • Set up your payroll software (we typically use BrightPay or Xero Payroll) to handle both employees and CIS subcontractors correctly.
  • Advise on the correct employment status for each worker based on the HMRC Employment Status Manual and case law.
  • Make sure you issue P45s and P60s on time and file your Full Payment Submission (FPS) to HMRC each month.
  • Calculate holiday pay correctly. Construction workers often work irregular hours, so the accrual method is usually more accurate than the 12.07% rolled-up method.
  • Help you claim the Employment Allowance (up to £10,500 off your employer NI bill) if you qualify.

If you use the CIS300 monthly return, your accountant should file it by the 14th of each month for paper returns or the 19th for electronic returns. Miss the deadline and HMRC charges penalties. A specialist knows the dates without looking them up.

Corporation Tax and Profit Extraction for Building Companies

Most builders operate as limited companies. That means you pay corporation tax on your profits at 19% (if profits are under £50,000) or 25% (if over £250,000), with marginal relief in between. Your accountant should structure your affairs to keep you in the lower rate where possible.

Profit extraction is where the real planning happens. As a director of a building company, you typically take a small salary (up to the NI threshold of £12,570) and the rest as dividends. Dividends attract 8.75% tax for basic rate taxpayers, 33.75% for higher rate, and 39.35% for additional rate. The annual dividend allowance is £500.

But there are specific issues for builders. If you own the vans, tools, or plant personally and use them in the business, you should charge the company for their use. That reduces the company profit and therefore the corporation tax bill. You can also claim capital allowances on new vans, diggers, and other equipment under the Annual Investment Allowance (AIA) of up to £1,000,000 per year.

A specialist accountant for builders will:

  • Calculate the most tax-efficient salary and dividend mix for you and any family members who work in the business.
  • Claim capital allowances on all qualifying plant and machinery, including vans, tools, scaffolding, and site cabins.
  • Review your director's loan account regularly. If you take more out of the company than you put in, you could trigger a tax charge of 33.75% under S455 if the loan is not repaid within 9 months of the year end.
  • Help you structure property purchases through the company or personally, depending on which is more tax efficient for your long term plans.

Making Tax Digital for Income Tax (MTD for ITSA) and Builders

From April 2026, self-employed builders and landlords with turnover over £50,000 must use MTD-compatible software to keep digital records and submit quarterly updates to HMRC. From April 2027, the threshold drops to £30,000. From April 2028, it drops to £20,000.

If you are a sole trader builder turning over £80,000, you will need to be MTD-ready by April 2026. That means using software like Xero, QuickBooks, or FreeAgent to track your income and expenses digitally. Your accountant should help you set this up and submit the quarterly returns on your behalf.

A specialist accountant for builders will:

  • Move you onto MTD-compatible software well before the deadline, not the week before.
  • Help you categorise your income correctly between CIS work, direct private work, and any non-construction income.
  • Submit the quarterly updates and the final declaration (the End of Period Statement) so you do not miss deadlines.
  • Make sure your records include all CIS deductions suffered so you claim the right credit on your tax return.

How to Choose an Accountant for Builders

Not every accountant who says they work with builders actually understands construction tax. Here is what to look for.

First, ask them directly about CIS. A good specialist will talk you through the CIS300, the monthly deadline, the 20% deduction rate, and the annual reconciliation without hesitating. If they look confused or say "we deal with that as part of the tax return", they are not a specialist.

Second, ask about VAT on new builds versus renovations. They should know the difference between 0% and 5% rates without checking a manual. They should also know about the VAT refund scheme for DIY builders and self-builders, which is a separate process.

Third, ask about employment status. They should be able to explain the difference between employed, self-employed, and CIS subcontractor status and the risks of getting it wrong. If they downplay the risk, walk away. HMRC is actively auditing construction businesses on this issue.

Fourth, check they are ICAEW, ACCA, or AAT qualified. That gives you professional indemnity insurance and a complaints process if something goes wrong. At Holloway Davies, we are ICAEW qualified and we specialise in construction businesses.

Finally, ask about software. A modern accountant for builders uses cloud software like Xero, QuickBooks, or FreeAgent. They should offer to set up your bookkeeping and connect it to their system so they can see your numbers in real time. If they still use paper spreadsheets or desktop Sage 50, you will struggle with MTD.

What a Good Accountant for Builders Costs

Fees vary depending on the size and complexity of your business. For a sole trader builder with turnover under £100,000, expect to pay roughly £80 to £150 per month for bookkeeping, VAT returns, and the annual Self Assessment. For a limited company builder with a few employees and CIS subcontractors, expect £150 to £350 per month, which should include payroll, CIS returns, VAT, and the company accounts and corporation tax return.

Some accountants charge a fixed monthly fee. Others charge per service. We prefer the fixed fee model because you know exactly what you are paying and there are no surprises at year end.

If you are paying less than £80 per month for a limited company building business, ask yourself what you are not getting. Probably not CIS returns. Probably not payroll. Probably not proactive VAT advice. And that is where the hidden costs start.

Common Mistakes Builders Make Without a Specialist Accountant

Here are the most frequent errors we see from builders who try to handle their own tax or use a generalist accountant.

  • Not registering for CIS as a contractor. If you pay a subcontractor, you must register and file monthly returns. HMRC penalties for late registration start at £100.
  • Charging 20% VAT on new builds. This is wrong. New-build residential properties are zero-rated for VAT on construction services. You are overcharging your customers and creating unnecessary VAT bills.
  • Not claiming CIS deductions suffered. If you are a subcontractor and a contractor deducts 20% from your invoice, you need to claim that credit on your tax return. Many builders forget and leave thousands with HMRC.
  • Treating employees as subcontractors. This is the most expensive mistake. HMRC can go back six years and charge you the employer NI, PAYE, and pension contributions you should have paid, plus interest and penalties.
  • Mixing personal and business spending. If you use your business account for personal spending, your accountant cannot separate it easily. You end up paying tax on personal expenses because they look like drawings or dividends.
  • Not keeping receipts for materials. HMRC can disallow your material costs if you cannot prove them. For a builder, materials are often 30% to 50% of turnover. Losing those deductions is costly.

A specialist accountant for builders prevents all of these. They set up the right systems from day one and review your position regularly.

Ready to Work With a Specialist Accountant for Builders?

If you run a building, roofing, or construction business in the UK, you need an accountant who understands CIS, construction VAT, and the specific payroll rules for site workers. A generalist accountant might get the basics right, but they will miss the planning opportunities that save you real money.

At Holloway Davies, we are ICAEW qualified and we work with builders across the UK. We handle CIS returns, VAT planning, payroll, and corporation tax for construction businesses of every shape and size. If you want to stop worrying about HMRC and focus on your builds, get in touch. We will talk through your situation and explain exactly how we can help.

You can also see our full range of services or read more about our team.