Construction Accountants for Building Firms, Developers and Property Investors
Construction and property businesses deal with more overlapping tax regimes than almost any other sector: CIS on labour, the reverse charge on VAT, SDLT on purchases, Section 24 on borrowing and a 60-day deadline on disposals. Each one is manageable on its own. As construction accountants we look at how they interact, because that is where the expensive mistakes are made.
Merit acts for builders, building contractors, subcontractors, developers and landlords across the UK. We are Chartered Certified Accountants and Chartered Tax Advisers, and our team includes professionals who have worked inside HMRC, the department that polices every regime on this page.
Real examples are in our CIS tax saving case studies, our construction and property VAT case studies and our property tax case studies.
CIS deductions: 20%, 30% or gross payment status?
The Construction Industry Scheme requires contractors to deduct tax from payments to subcontractors: 20% if the subcontractor is registered, 30% if not, and 0% with gross payment status.
- Contractors must verify each new subcontractor with HMRC (unless they have been on one of your CIS returns in the current or previous two tax years), file a CIS return by the 19th of every month (or, in a month with no payments, a nil return or an inactivity request), and give deduction statements to their subcontractors.
- The cost of materials the subcontractor bought directly, plant hired for the job and fuel used in the work (but not fuel for travel) is not subject to the deduction, and nor is VAT: see what expenses you can claim under CIS.
- Subcontractor companies set CIS deductions against their PAYE and National Insurance bill each month, then reclaim any surplus after the tax year ends. Sole traders and partners have the deductions credited in their Self Assessment return, with any excess repaid.
- Gross payment status ends deductions entirely and transforms cash flow. It depends on passing HMRC’s turnover, business and compliance tests, and since April 2024 the compliance test has covered VAT as well as CIS, PAYE and Self Assessment, so repeated late filings or payments on any of them can lose it.
Tip
If your company has had 20% deducted all year and its own payroll bill is modest, it is very likely due a CIS refund. We chase these as a matter of routine, and apply for gross payment status the moment the compliance record supports it. Our guide on how to claim CIS tax back as a limited company sets out the process.
The VAT domestic reverse charge still catches people
Where both supplier and customer are VAT registered and the payment is reported under CIS, most standard and reduced-rated construction services no longer carry VAT from supplier to customer (section 55A VATA 1994). The customer accounts for the VAT instead. Invoicing with VAT when the reverse charge applies, or the other way round, creates errors on both sides of the transaction.
The rules switch off for end users and intermediary suppliers who notify their status in writing, so the written end-user notice on each contract matters as much as the work itself. Subcontractors who used to rely on the VAT they collected for cash flow often become repayment traders under the reverse charge, and then benefit from monthly VAT returns.
We set up your invoice templates, check end-user notifications and move you to monthly returns where that brings the repayments in sooner.
Property developers: VAT, trading stock and profit timing
Developers face a different set of rules from investors. The first sale or long lease of a new dwelling is zero-rated (VATA 1994, Schedule 8, Group 5), so VAT on the build can be recovered in full. Converting a commercial building into homes, or bringing a dwelling empty for two years back into use, qualifies for the 5% reduced rate on the building work (Schedule 7A, Groups 6 and 7). Sites held as trading stock are valued at the lower of cost and net realisable value, and the profit on a development is taxed as trading income, not as a capital gain. We set up the company, VAT position and cost tracking before the land is bought, when the choices are still open.
What does Section 24 really cost a landlord?
An individual landlord gets no deduction for residential mortgage interest. Instead you get a basic-rate tax reduction at 20%. If you pay tax at 40%, the other 20% of your interest bill is simply extra tax compared to the old rules. From 6 April 2027, property income in England and Northern Ireland, and in Wales unless the Welsh Government sets different rates, is taxed at its own rates, which Budget 2026 has set at 24%, 44% and 49%, and the finance cost reduction is expected to rise to 24%. Scotland sets its own property rates. A higher-rate landlord therefore still loses relief on 20% of the interest, and an additional-rate landlord on 25%.
Example
A higher-rate landlord with £18,000 of gross rent and £9,000 of mortgage interest is taxed on the full £18,000 less running costs, then given £1,800 back for the interest (20% of £9,000). Under the pre-2017 rules the interest would have saved £3,600 (40%). Section 24 costs this landlord £1,800 every year on one property. Our guide to reducing tax on rental income sets out the options.
This is the single biggest reason landlords ask about companies, and the answer differs from one portfolio to the next, which is why we model it rather than recite it. Our accountants for landlords page covers this in detail.
Should your next property go in a company?
A company deducts all its mortgage interest and pays Corporation Tax at 19% up to £50,000 of profit, 25% above £250,000 and an effective marginal rate of 26.5% between. Money left in the company to buy the next property compounds faster. But the comparison has to include the full picture:
- Companies pay the 5% SDLT surcharge on residential purchases in England and Northern Ireland. Where a company buys a dwelling costing more than £500,000, a flat 17% rate can apply instead, unless a relief such as property rental business relief applies.
- Moving properties you already own into a company is a disposal at market value, so Capital Gains Tax and Stamp Duty Land Tax can both bite on the way in. Incorporation relief under section 162 TCGA 1992 can defer the gain, but only where the letting activity is a business in its own right (Ramsay v HMRC [2013] UKUT 226 (TCC)), the whole business is transferred as a going concern with all its assets other than cash, and the company pays in shares. For transfers on or after 6 April 2026 the relief has to be claimed in your Self Assessment return. Section 162 does nothing for SDLT, which is charged on market value under section 53 Finance Act 2003. Any SDLT relief, such as the partnership provisions in Schedule 15 where the properties are already held by a genuine partnership, has its own conditions and stands or falls separately.
- Taking the profits out as dividends adds a second layer of tax. The company route wins fastest for higher-rate taxpayers who reinvest.
- A company holding a UK dwelling worth over £500,000 is in ATED territory: an annual return is due even when a relief for commercial letting reduces the charge to nil.
Warning
Companies under common control are associated with each other (section 25 CTA 2010). A property company alongside your trading company divides the Corporation Tax limits between them and can drag both into the 26.5% band. Model the associated companies effect before you incorporate, not after.
Selling: CGT rates and the 60-day clock
Residential property gains for individuals are taxed at 18% within the basic rate band and 24% above it. A UK resident selling a residential property with tax to pay must file a residential property return and pay the tax within 60 days of completion. Non-residents must report every disposal of UK property within 60 days, whether or not tax is due; see our non-resident page. Miss it and penalties start automatically, even if your Self Assessment return is months away.
Our capital gains tax reporting service runs the 60-day computation, claims the reliefs that apply, and folds the disposal into your year-end return.
Making Tax Digital for landlords: who is in and when
Making Tax Digital for Income Tax started on 6 April 2026 for landlords and sole traders whose qualifying income for 2024/25 was over £50,000. Qualifying income is gross rent plus any self-employment turnover, before expenses, and on a jointly owned property only your share counts. The threshold falls to £30,000 from April 2027 (tested on 2025/26 income) and to £20,000 from April 2028 (tested on 2026/27 income). Quarterly updates are due by 7 August, 7 November, 7 February and 7 May, and all your UK properties count as one property business, so five flats mean four updates a year, not twenty.
Our Making Tax Digital accountant service runs the software, the quarterly updates and the year-end tax return on a fixed fee.
Why do construction firms and landlords choose Merit?
- Led by Chartered Tax Advisers. We are Chartered Certified Accountants and Chartered Tax Advisers, and in most cases the tax we save our clients exceeds the fee they pay.
- Worked inside HMRC. Our team includes professionals who have worked inside HMRC, so CIS compliance checks and property enquiries hold no surprises.
- Partners who have built businesses. Our partners have built their own businesses from nothing to over £1m in turnover.
- Fixed fees. Agreed up front, with unlimited advice included.
- Three UK offices. Manchester, London and Hertfordshire, with a free first meeting.
If you want to see the margin on each project and your cash position after CIS deductions every month, see how our management accounts and KPIs for construction businesses work. For contractors and developers turning over £1m or more, our complete finance function covers bookkeeping, CIS, VAT, payroll and monthly reporting under one fixed fee. We also claim capital allowances on plant, vans and equipment, including the £1m Annual Investment Allowance.
Construction and property questions we are asked most
These are the questions contractors, subcontractors, property developers and landlords ask us most often.
How do I get gross payment status?
You apply to HMRC and pass three tests: a compliance test on your filing and payment record, a turnover test (at least £30,000 of net construction turnover, excluding VAT and materials, for a sole trader, or £30,000 per partner or director or £100,000 in total for a partnership or company), and a business test showing you run a real construction business with a bank account. We prepare the application, and more importantly we keep the compliance record clean afterwards, because HMRC reviews gross status annually and late returns can lose it.
Gross payment status has become harder to keep. Since 6 April 2026 HMRC can cancel it immediately where a business knew or should have known it was part of a fraudulent supply chain, and a business whose status is cancelled on those grounds cannot reapply for five years rather than one. The defence is documented supplier due diligence, built before the letter arrives rather than after.
What should a reverse charge invoice actually say?
It carries all the details of a normal VAT invoice, adds no VAT to the amount payable, and states that the domestic reverse charge applies, for example “Reverse charge: customer to pay the VAT to HMRC” or “S55A VATA 94 applies”. It must also show the amount of VAT the customer has to account for, or the VAT rate where the amount cannot be shown. Software handles it once configured. The common failure is a subcontractor’s template still adding 20% VAT, which the contractor then wrongly reclaims.
We jointly own our rental properties. How is the income split?
Married couples and civil partners who live together are taxed 50:50 on jointly owned property by default (section 836 ITA 2007), regardless of who banks the rent. A different split is possible only where you own the property in unequal beneficial shares, usually under a declaration of trust, and you declare it to HMRC on Form 17 (section 837 ITA 2007). The form must reach HMRC within 60 days of the date of the declaration, and it applies to income from that date only, not to capital gains. Other joint owners are taxed on the share of the profits each of them receives or is entitled to (section 271 ITTOIA 2005), which usually follows ownership. Getting this right is often the cheapest tax planning available to a landlord couple.
I ran a holiday let. What changed for me?
The furnished holiday lettings regime was abolished from April 2025, so the old advantages, including full interest relief and capital gains treatment as a business asset, have gone. Holiday lets are now taxed like other residential lets, with Section 24 applying to the interest. One transitional door is still open: where the holiday letting business ceased before 6 April 2025, Business Asset Disposal Relief at 18% rather than 24% can still apply on a sale within three years of the date the business ceased, so no later than early April 2028. If your numbers were built on the old regime, they need rerunning.
Can my company reclaim the CIS tax deducted from it?
Yes. A limited company offsets CIS deductions against its monthly PAYE and NIC liabilities during the year, and reclaims any remaining balance from HMRC after the final payroll submission of the tax year. Repayments stall when HMRC cannot match the deduction statements, so keeping every statement is worth real money.
Do I need an accountant for one buy-to-let?
If there is a mortgage and you pay tax at 40%, usually yes. Section 24 changes the tax you pay every year, a sale triggers the 60-day CGT return, and MTD for Income Tax applies once your gross rent plus any self-employed turnover goes over £20,000 from April 2028 (£30,000 from April 2027). Getting any of these wrong typically costs more than a year of fees. If it is one unmortgaged property and you are a basic-rate taxpayer, we will tell you plainly that it may be simple enough to run yourself.
Get the structure right before the next project
Bring your last accounts (or let us prepare them through our accounts preparation service), your CIS statements or rent schedule, and the mortgage figures. In one meeting we will tell you whether your structure fits your plans, what CIS or VAT money is sitting unclaimed, and what a fixed fee looks like for the whole job.
No charge, no obligation, no jargon.
Last reviewed: October 2026 by Hussein Bhaiji FCCA CTA, Managing Partner.
What clients say about Merit on Google
“They were patient and kind when explaining tax returns and CIS payments for my business.”
Jennie D., Google review
“They flag things before we’ve even thought to ask, which is something we’ve never experienced with an accountant before.”
Farz B., Google review
“They quickly understand complex matters, explain them in straightforward terms and provide practical, commercially sound solutions tailored to our needs.”
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“Every year they are prompt and responsive, even reminding us when our filings and VAT reports are due.”
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“The team go above and beyond to deliver the best service and are always striving to find ways to improve the business position.”
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