Fortuna Accountants Ltd

The job came in at £84,000. You quoted £78,000. Everyone's pleased.

Except you also did about £11,000 of work nobody ever priced.

The extra socket. The two days stood waiting on the M&E contractor. The bit of groundwork that wasn't on the drawing. Day works signed off on a scrap of paper by a site manager who's since moved on.

None of it is anybody stealing from you. It's just work that happened faster than the paperwork.
And there's a pattern to it. The bigger the client, the tighter their process and the looser yours. They have a variation procedure. You have a good memory and a busy week.
What to do about it:

Nothing extra starts without an instruction in writing. An email counts. A text counts. A nod on site does not.

Price the variation before you do the work, not at the end of the job. At the end you're negotiating from behind, against someone whose job it is to close the account down.

Give variations their own line in your job costing, separate from the original contract. Otherwise the overrun just looks like poor estimating, and you'll spend next year fixing the wrong problem.

Day works: signed sheet, same day, rates agreed at contract stage rather than argued at the end.
One job this week: take your last completed job and list every extra you actually did. Tick the ones that were instructed, priced and invoiced. The unticked ones are your number.

Have a guess at that number before you do the exercise. Then tell me how close you were.

Your CIS return was due on the 19th. You filed it six months later.

That one return has cost you £600 before HMRC has even looked at what's on it.
The penalties for a late monthly CIS return stack. They don't replace each other.

One day late: £100.
Two months late: another £200.
Six months late: another £300, or 5% of the CIS deductions on that return, whichever is higher.
Twelve months late: another £300, or 5%, whichever is higher. In serious cases it goes to £3,000 or 100% of the deductions.

So a single return, half a year late, is £600 minimum. Miss three months across a bad winter and you're into four figures for paperwork on money you'd already paid over.

The one that catches people out is the nil return.

If you paid no subcontractors in a month, you still have to tell HMRC. Either file a nil return, or ring them and ask for the scheme to be set temporarily inactive. Doing nothing counts as a late return, and it's the same £100 as if you'd paid out £80,000 and declared none of it.

Quiet January. No subbies on site. Nobody files anything, because there was nothing to file. £100, for a month where no money moved.

What to do about it:
Put the 19th in the calendar as a recurring job with a named person against it. Not "whoever gets to it."
File the quiet months. Or get the scheme made inactive if you genuinely won't use subbies for a while, and put a note in the diary to switch it back on.

If you've got returns outstanding, file them now rather than when you've got time. The ladder carries on climbing while you decide.

If a penalty has landed and there was a genuine reason behind it, you can appeal. But there's a time limit, so it isn't something to leave in the pile with the rest of the post.

One job this week: check every month this year is filed. Including the ones where nothing happened.

Which is more likely in your business — a month missed because it was chaos, or a month missed because it was quiet?

Your invoice said £8,000 labour, £4,000 materials.

The contractor deducted CIS on all £12,000.

That is an extra £800 sitting with HMRC instead of in your bank. It isn't lost money. It just isn't yours to use until you claim it back, and that takes months.

CIS is a deduction on labour. Before working out the 20%, the contractor is supposed to take off VAT, materials you paid for directly, consumable stores, fuel other than for travel, plant hire, and manufacturing or prefabricating materials.

Two things go wrong, and they go wrong in opposite directions.

First: the materials have to be ones you paid for. If the contractor supplied them, or reimbursed you for them, they don't come off. Plenty of subcontractors deduct materials that were never their cost.

Second: HMRC expects the materials figure to be the direct cost. If you've put a margin on materials, the margin isn't materials. It sits inside the payment and it's within the deduction. And refusing to tell the contractor what you actually paid doesn't protect it. The contractor is entitled to make their own estimate of the split.

So an overstated materials line is a liability sitting with the contractor. An understated one is your cash sitting with HMRC for a year.

What to do about it:
Split labour and materials on every invoice. Not "supply and fix, £12,000."
Keep the purchase invoices. The contractor can ask to see them, and HMRC can ask the contractor.
If you're the one deducting: don't take a materials figure on trust when it looks wrong. The liability for under-deducting is yours, not the subcontractor's.

One job this week: take your last three payment and deduction statements and check the deduction against your invoices. If it's 20% of the whole invoice, ask why.

Which side of this are you on this week: deducting, or being deducted from?

Same £40,000. Two very different tax outcomes.

A van and a car both cost you £40,000. To HMRC they're worlds apart.

The van is plant. Buy it and you can claim 100% of the cost in the year you buy it. The full £40,000 off your profit, often several thousand pounds of tax saved right now.

The car? Excluded from the Annual Investment Allowance, from full expensing, and from the new 40% allowance. It goes in a pool and the relief trickles out over years, at a main-pool rate that just dropped from 18% to 14%. If it's not electric, slower still.

So if you're choosing a vehicle and the tax matters to you, that one classification is worth thousands.
And don't assume. Some commercial-looking vehicles are treated as cars for tax. Check the exact model before you buy, not after the money's gone.

Van or car isn't just a driving decision. It's a tax decision.

He's been on your books as a subbie for four years.

Same hours. Same site. Your tools. Your instructions. No other customers.

HMRC doesn't care what the invoice says. It cares what the working relationship actually looks like.

CIS is a tax deduction scheme. It is not a statement of employment status. Registering someone under CIS and deducting 20% does not make them self-employed, and it will not protect you if HMRC decides they were an employee all along.

If HMRC reclassifies, the bill lands on the contractor. Not on him. You're looking at the PAYE and National Insurance that should have been operated, employer's NI included, plus interest and penalties, going back years. That's before anyone mentions holiday pay or an employment tribunal, which is a separate risk with a separate test.

The questions that decide it:

Who controls how, when and where the work is done?

Can he send a substitute — genuinely, in practice, not just in the contract?

Does he carry any financial risk? Does he put his own mistakes right at his own cost?

Does he provide his own significant equipment?

Does he work for anyone else?

Is there an obligation on you to offer work and on him to accept it?

If most of those answers point one way, the paperwork won't save you.

This isn't a reason to panic. It's a reason to look. Run HMRC's CEST tool for your longest-standing subcontractors and keep the output. If the answers come back uncomfortable, get advice before HMRC gets curious. It's a much cheaper conversation now than during a compliance check.

Going from eight on site to twenty-five is usually the point where this stops being theoretical.

If you're not sure where you stand, book a 30-minute fact-find with Kate. Link in the comments

Your lads are on £180 a day. You charge them out at £240.

That £60 gap is not your margin.

Here's what has to come out of it first.

Employer's National Insurance on the wage. Holiday pay — 28 days statutory means you're paying for roughly 253 working days of output, not 365. Pension. Sick days. Training days. The two hours a week sat in traffic between sites on your fuel.

Then the van. Insurance, fuel, tax, maintenance, the finance payment. Tools, replacements, PPE, phone.

Then the overheads that never appear on a job sheet. The yard. The office. Your estimator. Your bookkeeper. Your insurance. Your software. Your own time, which nobody ever costs.

Here's the calculation almost nobody does.

Take your total annual overhead. Divide it by the number of chargeable days your team actually delivers — not the number of days in the year. That's your overhead recovery per day. Add it to the fully loaded cost of the operative.

Now you have your true cost per day on site. That's the number your charge-out rate has to beat, and by enough to be worth getting out of bed for.

Most trades businesses price off the wage. The wage is the smallest part of it.

One job this week: work out the true cost per chargeable day for one operative. Overheads in, non-chargeable days out. Then go back and look at your last three quotes.

What's your charge-out rate actually based on — a calculation, or what the last firm was charging?

Every invoice you send a main contractor comes back 20% light.

That 20% is still your money. A lot of firms never go and get it.

Here's how it's supposed to work.

You're a limited company. You do work for a contractor. They verify you, deduct 20% CIS from the labour element, and pay it to HMRC on your behalf. That's CIS suffered.

You get it back by setting it against your own PAYE bill. Send your monthly FPS as normal, then send an Employer Payment Summary — an EPS — with the total CIS deductions suffered year to date. HMRC takes those deductions off what you owe in PAYE and National Insurance. You pay the balance.

If the deductions are bigger than your PAYE bill, you carry the excess forward to the next month in the same tax year. Anything still unused at the end of the year is repaid.

The failure point is the EPS.

No EPS, no offset. The FPS on its own doesn't tell HMRC you've suffered anything. So the company pays its PAYE in full every month while a growing pile of its own money sits with HMRC doing nothing.

On a business with a decent chunk of contractor work, that can be tens of thousands parked in the wrong bank account for a year.

Three things to check:

Is an EPS being filed every month, or only when there's nothing to pay?

Does the year-to-date CIS figure on the EPS match your own record of deductions suffered?

Do you have the statements from every contractor to back it up? HMRC will want them.

If the answer to the first one is "I'm not sure", that's the whole post.

Pull up your last three months of payroll submissions before the bank holiday. It's a ten-minute job.

The full breakdown of the CIS housekeeping that quietly costs trades businesses money goes out in Fortuna Financial Focus every other Tuesday. Link in the comments.

You've drawn £40,000 out of the company this year.

Not salary. Not dividends. Just money out when the job money came in.

Your accountant calls it a director's loan. HMRC calls it something more expensive.

If that loan is still outstanding nine months and one day after your year end, the company pays s455 tax on it. For loans made on or after 6 April 2026, that rate is 35.75%.

On £40,000, that is £14,300. Paid by the company. Not by you.

You do get it back — eventually. Once the loan is repaid you reclaim it using form L2P. But the refund doesn't land until nine months and a day after the end of the accounting period in which you repaid it. So HMRC can be holding your £14,300 for the best part of two years.

And if the balance goes over £10,000 at any point in the tax year, there's a benefit in kind on top, taxed on HMRC's official rate of 3.75%, unless the company charges you real interest at that rate or above.

What to do about it:

Know the balance now, not at year end. If your bookkeeping is current this is a five-minute check.

Work out the cheapest route to clear it before the nine-month deadline. A dividend, a bonus, or cash back in are not equally priced. Run the numbers first.

If you can't clear it, at least charge interest at the official rate to kill the benefit-in-kind charge.

Most directors we meet aren't doing anything wrong. They just didn't know the clock was running.

When did you last check what your director's loan account is actually sitting at?

You quoted 18% margin on the job. You closed it out at 6%. Where did the other 12% go?

Almost every trades business owner we ask can't answer that in under a minute — because the quote and the actual costs live in two different places, checked at two different times (or never checked at all).

The leak is rarely one big thing. It's usually three small ones stacking up:

Labour hours that ran over and never got flagged mid-job.
A materials price rise between quoting and ordering that nobody re-priced into the job.
Variations the client asked for on-site that got done as a favour instead of a formal change.

None of those show up until the job's finished and the numbers are in — by which point you've already quoted the next three jobs the same way.

The fix isn't complicated: pull your last five completed jobs, put quoted margin next to actual margin, and look for the pattern. Nine times out of ten it's the same leak repeating.

What's usually eating your margin — labour, materials, or scope creep nobody priced?

You can owe VAT on money you haven't been paid yet.

On standard VAT accounting, you owe HMRC VAT the moment you raise the invoice — not when the client actually pays it. In construction, where 30, 60, even 90-day payment terms are normal, that gap can be brutal. You've invoiced £50K, HMRC wants their £8.3K next quarter, and the client hasn't paid you a penny of it yet.

The VAT Cash Accounting Scheme flips that. You only account for VAT when money actually lands in your account — and you only pay HMRC once your client has paid you.

It's not right for everyone. If you reclaim a lot of VAT on materials before you're paid (big upfront supplier bills), cash accounting can work against you. But for most trades businesses waiting weeks or months to get paid by main contractors, it closes a real cashflow gap.

Worth a five-minute conversation with your accountant before your next VAT return, not after.

We go through scenarios like this every fortnight in Fortuna Financial Focus — subscribe for the full breakdown, link in the comments.