SECTOR GUIDE · CONSTRUCTION
Construction. CIS, PAYE, project gaps.
The pattern we see
Construction has a tax pattern most other sectors don't. CIS deductions sit alongside monthly PAYE, the two interacting on the same return, with subcontractor payments timed against client certificates that arrive on a different rhythm. A main contractor running a £4m project can be PAYE-current and CIS-current and still be operationally short on cash because the next stage payment doesn't land until week ten and the supply chain wants paid in week six.
The bills we see are mostly PAYE/NIC (heavy because of direct labour and CIS deductions held in trust), then VAT in lumpy quarterly amounts, then occasional Corporation Tax for the established firms that have moved past the survival phase. The reverse VAT charge for construction services (in place since 2021) has changed VAT cashflow materially: domestic reverse charge means main contractors no longer pay VAT to subcontractors, which has improved subcontractor compliance but tightened main contractor working capital.
Lender appetite is sector-specific. Some lenders won't touch construction at all because of the project-risk profile; others specialise in it and price competitively. Subcontractor PAYE/CIS funding is harder than main contractor VAT. Appetite drops sharply below around £25m revenue or where retentions are heavy.
Which products fit
Bill type, size, and lender appetite for this sector.
| Bill type | Likelihood | Typical size | Lender appetite |
|---|---|---|---|
| PAYE | High | £20k–£200k | Specialist lenders only |
| VAT | High | £25k–£300k | Strong for main contractors, selective for subbies |
| CT | Medium | £30k–£500k | Available on solid filed accounts |
| R&D | Medium | £40k–£300k advance | Genuine R&D claims (offsite manufacturing, sustainability) advance well |
Real example
A £6m turnover M&E subcontractor in the Midlands hit a PAYE arrears problem in October: two months behind on a £42,000-per-month liability because a main contractor had pushed two stage payments into November. HMRC had sent the formal demand. We placed a six-month PAYE arrears facility with a specialist lender, cleared the £84,000 plus interest direct to HMRC inside six working days, and the firm caught up its compliance record before the December PAYE was due.
Anonymised. Names, locations, and trading details changed. Numbers indicative.
Watch-outs
- CIS deductions are money held in trust for HMRC. Arrears here escalate faster than VAT. HMRC moves to formal action sooner.
- Reverse VAT charge means main contractors carry VAT cashflow they previously netted off; the bill arrives bigger than firms expect.
- Retentions held against contracts can mask a working capital problem until they release. Forecast on cleared cash, not contract value.
- If your CIS gross payment status is at risk (too many compliance failures), losing it adds 20% friction to every payment. Worth managing actively.
Construction bill on the horizon? We'll quote it.
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