The UK construction industry is booming thanks to major projects like HS2, housebuilding targets and the 2022 Commonwealth Games.
At Champion Accountants, we support a variety of clients in this complex sector, with our experience including labourers and subcontractors, through to housebuilding firms, landlords and commercial property developers. In this article, we shine a spotlight on the most pertinent issues facing the construction industry today.
One of the greatest challenges is cashflow, with the National Federation of Builders revealing that SMEs are currently owed c.£30bn in unpaid invoices. Having a strong cashflow management system to get cash in at the right time is crucial to long-term success. Here are our tips for keeping your cashflow in check:
1. Negotiate your terms – Extended supplier terms can be just as important as receiving payments as quickly as possible. If you’re in a position to pay early, then consider negotiating early settlement discounts.
2. Forecasting – A good cashflow forecast will ensure no unpleasant surprises, but keep projections up to date and adjust as necessary.
3. Request deposits – If upfront payments are required then consider implementing client deposits
4. Factoring – Invoice factoring will ensure you are paid on time, with a good factoring company unlocking this capital by taking your unpaid debts and chasing payments themselves.
5. Credit control – Factoring isn’t the preferred choice for everyone, therefore good credit control is essential. Consider reducing your credit terms and encourage payments through settlement discounts.
Land Remediation Relief
Land Remediation Relief offers a big incentive to limited company developers that bring contaminated and derelict land back to productive use. This incentive provides Corporation Tax relief equal to 150% of the qualifying expenditure incurred in the cleaning up of acquired land. It is only available to Limited companies on acquired sites and exceptions apply.
Stamp Duty Land Tax
Stamp Duty Land Tax is increasingly more complex as HMRC continues to tighten the legislation. The rules and rates vary for residential properties, corporate bodies, linked purchases, trusts and more, meaning Stamp Duty Land Tax must be reviewed on a case by case basis.
Construction Industry Scheme
Contractors registered under the Construction Industry Scheme (CIS) must deduct certain taxes from subcontractor payments depending on whether they are CIS registered, or otherwise make payment without deduction if the subcontractor has gross payment status.
As of 6 April 2019, HMRC has extended powers to enforce security deposits from businesses that it thinks will not pay their tax liability on time, which now covers Corporation Tax and CIS deductions, as well as VAT, PAYE and National Insurance.
Deducting capital allowances from taxable profit is a major incentive within the construction industry, with certain relief available on:
- Plant and machinery
- Thermal insulation
- Making certain buildings comply with Part B building regulations
- Enterprise Zones
- Research and development
- Structures and buildings
- Domestic Reverse Charge
From October 2019, HMRC will implement a new Domestic Reverse Charge in a bid to combat VAT fraud in the construction supply chain. The change will only affect those operating through CIS and
means that the customer receiving the construction services will pay the VAT incurred direct to HMRC, rather than to the supplier.
The new reverse charge will significantly impact how businesses account for VAT and manage cashflow, meaning good financial planning is essential and required will in advance of the 1 October
In addition to the above, our team of expert accountants, tax specialists and business advisors can support with:
- Raising Finance
- Capital Gains
- Corporate Structures
- Tax Planning
- Strategic Planning
- Inheritance Tax
- Purchases and Disposals
For more information, contact Champion Accountants today, with offices in Manchester, Chester, Preston and Blackpool.