SimpleReturns

Company tax returns for construction companies

Reviewed by Lee Jones, Founder · Updated 16 July 2026
The short answer

If you run a building or construction firm through your own limited company, the filing duty is the same as for every company in the country: a Company Tax Return to HMRC within 12 months of your company's year end, plus a set of accounts, even in a year you made a loss. What makes a construction company different is the moving parts inside it: project income, the materials you bill on, the plant you hire versus the plant you buy, and the subcontractors you pay. Two of those parts, the Construction Industry Scheme and the VAT rules for construction, are genuinely complicated, and we will tell you plainly where an accountant is the right call rather than pretend software handles everything.

Official source. This guide is a plain-English summary of official GOV.UK guidance, not advice. The authoritative source is Company Tax Returns on gov.uk. Always rely on that over our summary.

What counts as your company's income?

Everything the company was paid for doing the work. For a construction company that usually means:

  • Project and contract payments, whether the customer is a homeowner, a main contractor, a developer or a council. Staged payments and retentions released at the end of a job are income too.
  • Materials you bill on. If you buy £5,000 of timber and blocks and charge the customer £5,000 for them, that £5,000 coming in is income and the £5,000 going out is an expense. Record both in full. Do not quietly cancel one against the other, because your return needs the true totals of each.
  • Labour you invoice, including work your own subcontractors did that you charged on to the client.

One important warning if your company works as a subcontractor for a bigger builder: money that landed in the bank may not be your full income. Under the Construction Industry Scheme, the contractor who pays you usually takes tax off first, normally 20%, or 30% if your company is not registered, and passes it to HMRC as an advance payment towards your tax. So your return has to be built from what you invoiced, not from what arrived. Your company can later reclaim or offset that deducted money, but only after all its payroll, CIS and Corporation Tax returns are in, and getting that right is genuinely fiddly. If tax has been deducted from your company's payments this year, that reconciliation is an accountant's job.

Your tax bill is worked out on the profit, which HMRC calculates its own way rather than simply copying the accounts figure. Small companies pay 19% on profits up to £50,000; bigger profits move towards 25%.

What can your company claim?

The rule behind every expense is simple: the cost must be purely for the business. If something is part personal, keep it out of the company rather than putting a share through, because a company cost with private use can trigger an extra personal charge (a "benefit in kind"), not a part-claim. For a construction company the usual list looks like this:

  • Materials. Everything you buy to build the job, whether you bill it on at cost or with a markup.
  • Subcontractor payments. What you pay the subbies for their labour is a cost of the work. (The tax you deduct and hand to HMRC on their behalf is a separate duty, covered below.)
  • Plant hire. Hiring an excavator, scaffolding, a tower or a mixer for a job is a running cost you claim in the year you pay it.
  • Plant and equipment you buy. Buying kit outright, a digger, a van, power tools, is treated differently: it is a capital item, and most of it qualifies for a full deduction against profits in the year you buy it, under an allowance worth up to £1 million a year. Ordinary business cars are the exception and do not get that full up-front deduction. The short version: hired plant is claimed as you pay it, bought plant is claimed as an asset.
  • Safety kit and site costs. Hard hats, boots, hi-vis, site welfare, waste and skip charges, all costs of doing the work.
  • Insurance. Public liability, contractors' all-risks, plant and van cover.
  • Phone, software and admin. Job-management and estimating software, the company phone, the accountant's fee.

Keep the receipts and the invoices. The claim is only as good as the paper behind it.

The trap in this trade: being a CIS contractor

If your company pays subcontractors, you are almost certainly a contractor under the Construction Industry Scheme, and that comes with real duties: you have to register before you take on your first subcontractor, check with HMRC that each subbie is registered, deduct the right amount of tax from their payments, pass it to HMRC, and file a return every single month or risk a penalty.

We are not going to walk you through the mechanics of that here, because getting it wrong has real consequences and it changes with your setup. This is the part of a construction company's tax life where a good accountant or payroll service earns their fee, and we would rather say that plainly. There is a second complication worth naming for the same reason: for most construction work billed between VAT-registered businesses, a rule called the VAT domestic reverse charge means the customer accounts for the VAT instead of you. If your company is VAT registered and works for other builders, get an accountant to set that up correctly.

One more line on VAT while we are here: if the company's takings go over £90,000 across any rolling 12-month period (not just your accounting year), it has to register for VAT at all. Construction companies hit that line quickly because materials billed on count towards it.

What does filing actually look like?

HMRC's own free filing service has closed, so every company now files through commercial software. With SimpleReturns, you upload the company's bank statement, answer a few plain-English questions (no accounting words, we promise), and check the figures on one screen before anything goes anywhere. We then file both things every company owes: the tax return to HMRC and the accounts to Companies House. It is free to start, no card needed, and £99 flat when you file.

One deadline to respect: file late and the penalty is £200 from the very first day. Put your year end in the phone now and give yourself a clear evening well before it.

Common questions

Is the money in my bank my full income if CIS was deducted?

No. If your company works as a subcontractor, the contractor who pays you usually takes tax off first, normally 20%, or 30% if your company is not registered. Your return has to be built from what you invoiced, not from what arrived, and the reconciliation of deducted tax is an accountant's job.

Do I record materials I bill on to the customer?

Yes. If you buy £5,000 of materials and charge the customer £5,000, the £5,000 coming in is income and the £5,000 going out is an expense. Record both in full rather than cancelling one against the other, because your return needs the true totals.

Is hired plant treated differently from plant I buy?

Yes. Hiring an excavator, scaffolding or a mixer is a running cost you claim in the year you pay it. Buying kit outright is a capital item, and most of it qualifies for a full deduction against profits in the year you buy it, under an allowance worth up to £1 million a year.

Do I have to deal with the Construction Industry Scheme myself?

If your company pays subcontractors you are almost certainly a CIS contractor, with duties to register, verify subbies, deduct tax, pass it to HMRC and file monthly. The mechanics have real consequences, so this is a part where an accountant or payroll service earns their fee.

Want your construction company's return filed for you?

You upload the company's bank statement, answer a few plain-English questions with no accounting words, and check the figures on one screen before anything goes anywhere. We then file both things every company owes: the tax return to HMRC and the accounts to Companies House. Free to start, no card needed, and £99 flat when you file.

Start your return

And if your company deducts CIS tax from subcontractors, or the VAT reverse charge applies to your work, get an accountant to run that part; we would rather tell you that plainly than pretend software solves it.

General guidance, not advice. This guide explains how the rules generally work for small UK limited companies. It isn't tax advice for your specific situation, if you're unsure, check with us or an accountant.