Accounting software for construction firms: CIS, reverse charge VAT and applications for payment

Why generic setups fall short

Construction has tax and contract rules that most other trades never meet: the Construction Industry Scheme (CIS), the VAT domestic reverse charge, retentions and the Construction Act's payment notice regime. Software that handles only simple sales invoices leaves these to spreadsheets — which is where errors creep in.

CIS: deductions and monthly returns

As a contractor you deduct 20% from payments to registered subcontractors, 30% to unregistered subcontractors, and nothing where the subcontractor has gross payment status ^[1]. Deductions apply to the labour element of the payment, not to materials ^[1].

You file a monthly return to HMRC by the 19th of every month; in a month with no payments you still need to file a nil return or tell HMRC you are inactive ^[2]. Software with CIS built in calculates the deduction, produces payment and deduction statements, and prepares the return.

The VAT domestic reverse charge

For most supplies of building and construction services reported under CIS, between VAT-registered businesses, the customer — not the supplier — accounts for the VAT to HMRC ^[3]. Your invoices must say so, and your VAT Return must treat them correctly. There are exclusions, notably for end users and intermediary suppliers who confirm their status in writing ^[4].

Applications, notices and retentions

• Interim applications for payment: the statutory clock for payment notices runs from the due date, set by the contract or the Scheme ^[5].
• Payment and Pay Less Notices: missing one can make the sum applied for payable in full ^[5].
• Retentions: every amount withheld needs a release date and a reminder when it falls due.

Accounting software records these as invoices; it rarely tracks the legal deadlines around them. That is the gap Nemexio fills.

Checklist before you buy

• CIS deductions, statements and monthly returns built in.
• Reverse charge VAT codes and invoice wording.
• Project or job tracking.
• An API so a specialist tool can read applications, retentions and due dates.