CIS accounting

CIS accounting and compliance for civil engineering firms.

Civil engineering firms operate at the complex end of the Construction Industry Scheme. Long-duration framework contracts, multi-tier subcontractor chains, substantial plant and materials supply, and retention periods that can run for years: each of these creates CIS obligations and cash-flow pressure that require proper management at director and finance director level. Since 6 April 2026, the GPS anti-fraud rules under Finance Act 2026 have raised the compliance stakes further. A firm that cannot demonstrate documented due diligence at every payment now risks losing GPS without notice and a five-year ban on reapplication.

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£100,000

Whole-company GPS turnover test (or £30,000 per director)

20%

Knowledge-based penalty on qualifying payments under FA 2004 s.62A

5 years

GPS reapplication ban after revocation on fraud grounds

The specific challenges

What makes civil engineering firms accounting different.

GPS at company scale: the per-director turnover test

For a limited company to qualify for Gross Payment Status, net annual CIS turnover must reach either £30,000 per director or £100,000 in total, whichever is lower in terms of the test that applies given the company structure. Net turnover excludes VAT and the cost of materials purchased for jobs. On large civil engineering contracts with significant plant hire, concrete, aggregates and geotextile supply, the materials strip-out matters: firms regularly undercount their qualifying CIS turnover by failing to separate labour from materials precisely.

April 2026 GPS revocation and the due-diligence duty

Finance Act 2026 (Royal Assent 18 March 2026) introduced immediate GPS revocation where HMRC determines a contractor knew or should have known about fraudulent activity in its supply chain. The should-have-known standard means that failing to carry out pre-payment due diligence is itself sufficient for revocation, with no proof of intent required. For civil engineering firms working with multi-tier subcontractor chains on infrastructure projects, this is a material risk. The three required due-diligence steps before each payment are: re-verify the subcontractor CIS status with HMRC, run a Companies House legitimacy check, and carry out bank account name verification.

Framework contracts and rolling retention periods

Framework agreements in civil engineering often involve staged release of retention funds, sometimes over 12 to 18 months after practical completion. Each retention release is a CIS payment and must be handled correctly: the deduction rate at the time of the original contract may differ from the rate at the time the retention is released if a subcontractor's GPS status has changed. Firms also need to ensure CIS300 returns are filed for every tax month including nil returns from April 2026, even in months where only retention releases and no new contract payments are made.

Public sector contracts and the Regulation 24ZA exemption

From April 2026, payments made to local authorities and public sector bodies are fully exempt from CIS under new Regulation 24ZA. Contractors working on public sector infrastructure projects no longer apply CIS deductions to those payments and do not include them in their CIS300 returns. Getting the distinction right between public sector body (exempt) and private-sector main contractor on a public-funded project (not exempt) requires care.

How we help

What we do for civil engineering firms.

GPS application, maintenance and anti-fraud compliance

We manage the GPS application and the three qualifying tests for civil engineering limited companies: business test, per-director or total turnover test (using correctly stripped net CIS figures), and the 12-month compliance test. From April 2026 we also implement the documented pre-payment due-diligence workflow required to meet the should-have-known standard under Finance Act 2026.

Monthly CIS300 returns and nil-return management

We prepare and file your CIS300 monthly return by the 19th of each following tax month, handle nil returns in inactive months (mandatory again from 6 April 2026), verify subcontractor status before each payment, and issue compliant payment and deduction statements within the 14-day requirement.

EPS reclaim for limited company subcontractor income

Where your firm also receives CIS deductions as a subcontractor, we configure the Employer Payment Summary mechanism to offset CIS suffered against PAYE/CIS liabilities in real time. This eliminates the 12 to 18 month wait for a Corporation Tax refund and releases cash back into the business monthly.

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“We had never formalised the due-diligence process on subcontractor payments. After April 2026 that became a real exposure. Getting a documented workflow in place before any HMRC enquiry was important to us.”

Finance director, civil engineering contractor, major infrastructure projects

Composite snapshot based on client patterns. Name and figures anonymised. The tax mechanics are real.

Questions from civil engineering firms

Our firm has three directors. What is the GPS turnover test for us?

For a limited company the GPS turnover test requires net annual CIS turnover of either £30,000 per director or £100,000 in total. For three directors, £30,000 each totals £90,000, which is below the £100,000 alternative, so the effective threshold is £90,000 net of VAT and materials. Net turnover excludes the cost of materials, plant hire passed on at cost and VAT. We calculate your qualifying figure precisely, which often differs from total invoice value on large civil engineering contracts.

What does the April 2026 should-have-known rule mean in practice for a framework contractor?

Under Finance Act 2026, HMRC can revoke GPS immediately if it finds a connection between your payments and fraudulent CIS activity and concludes you should have known about it. No proof of intent is required: inadequate due diligence is enough. For each subcontractor payment, you need a documented record of: CIS verification with HMRC, a Companies House legitimacy check, and bank account name verification. On a framework with a large subcontractor pool, we build that workflow into the payment run so the records exist before every payment leaves the firm.

Do retention releases count as CIS payments that need to appear on the CIS300 return?

Yes. Retention releases are payments under a construction contract and must be included in the CIS300 return for the month in which they are made. The deduction rate to apply is the subcontractor's verified status at the time of the retention release, not at the time of the original contract. If a subcontractor's GPS status has changed in the intervening period, the rate may be different.

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Specialist in CIS and construction accounting, not a generalist practice

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