Builder Accounting Rules Explained: CIS, VAT, and Allowable Costs

Running a building business isn’t just about finishing projects on time. It’s also about keeping your money organised, staying compliant with HMRC, and making sure your profits don’t disappear through avoidable tax mistakes. Many builders earn a good income but still struggle with cash flow because tax rules, subcontractor payments, and VAT deadlines can catch them off guard.

That’s where accountants for builders make a real difference. A specialist understands how construction payments work, what records HMRC expects, and how to keep your accounts clean without slowing down your day-to-day work.

In this guide, you’ll learn the key builder accounting rules in the UK, including CIS, VAT, allowable costs, and what to look for when choosing the right support.

Why Builder Accounting Is Different From Other Businesses?

Construction has unique financial challenges compared to retail, office-based services, or online businesses. Payments can be irregular, projects can overlap, and you may work with subcontractors who need to be verified and paid correctly.

Builders also deal with compliance rules that many industries don’t, especially CIS. If you get this wrong, it can lead to deductions, penalties, and stress at the worst time.

This is why accountants for builders often focus on systems, tracking, and HMRC compliance rather than only “end of year accounts.”

Common issues builders face

• Losing receipts or invoices during busy site work
• Mixing business and personal spending
• Not knowing what can be claimed as a cost
• Late CIS returns and deductions
• VAT surprises due to wrong scheme selection
• Poor cash flow planning during quiet months

Understanding CIS: The Construction Industry Scheme (Simple Explanation)

CIS is a tax system that applies to contractors and subcontractors in the construction industry. It controls how subcontractors are paid and how tax is deducted before payment is made.

If you pay subcontractors, you usually act as the contractor and must: Verify subcontractors with HMRC

• deduct CIS tax (if required)
• Submit monthly CIS returns
• Provide payment statements

If you work as a subcontractor, CIS deductions may already be taken from your pay, which can affect your cash flow and tax position.

Accountants for builders help you understand whether you’re classed as a contractor, subcontractor, or both, because many builders fall into mixed roles.

CIS deduction rates (basic idea)

• 0% for gross payment status (approved by HMRC)
• 20% for verified subcontractors
• 30% for unverified subcontractors

The key point: CIS isn’t always your final tax bill. It’s often a deduction that affects your tax calculation later.

VAT for Builders: When It Applies and What to Watch

VAT can be tricky in construction because different work types may be treated differently. Some work is standard-rated, some may be zero-rated, and some may fall under special rules depending on the job.

Many builders register for VAT because they cross the threshold, but even if you register voluntarily, you need the right setup to avoid cashflow issues.

Accountants for builders often help with:

• VAT registration
• choosing a VAT scheme
• tracking VAT on materials and subcontractors
• filing VAT returns correctly and on time

Allowable Costs for Builders: What You Can Claim

Knowing what you can claim is one of the fastest ways to improve your financial position legally. The general rule is that costs must be for business purposes, not personal use.

Builders often have many legitimate costs, but the issue is proving them with records.

This is where accountants for builders bring value, because they don’t just “claim everything.” They help you claim the right costs, backed by clear evidence.

Common allowable costs for builders

• Tools and equipment (drills, cutters, safety gear)
• Materials used on jobs
• Fuel and travel between sites (business-related)
• Van costs (insurance, repairs, servicing)
• Workwear and PPE (boots, hi-vis, helmets)
• Subcontractor payments
• Public liability insurance
• Professional fees, including accountancy
• Phone and internet (business portion)
• Training that improves existing skills

Costs builders often get wrong

• Everyday clothing that isn’t protective workwear
• Personal meals that aren’t part ofthe  allowable travel rules
• Home-to-site travel that counts as normal commuting
• Big equipment purchases without clear business use

FAQ: Accountants for Builders (People Also Ask)

1. What records should builders keep for accounting?

Keep invoices, receipts, subcontractor payment details, CIS statements, mileage logs, and bank transactions. Digital copies are fine as long as they are clear and organised.

2. Can builders claim fuel and van costs?

Yes, if the travel is for business purposes. You can claim mileage or actual vehicle costs depending on your setup. A contractor accountant can advise which method suits your situation.

3. What is gross payment status in CIS?

Gross payment status allows subcontractors to be paid without CIS deductions. HMRC has criteria for approval, and you must stay compliant to keep it.

4. Do builders have to register for VAT?

You must register if your turnover passes the VAT threshold. Some builders register earlier, but it depends on clients, pricing, and business goals.

Conclusion

Builder accounting is more than tracking income and expenses. It involves CIS compliance, VAT planning, and knowing which costs are genuinely allowable. When your records are clean and your tax planning is structured, you can focus on completing work and growing your business without constant financial pressure.

Working with accountants for builders helps you stay organised, reduce risk, and understand your numbers properly. If you want professional support that fits the construction industry, Account Ease is a practical option to explore for builder-focused accounting help.