VAT, PAYE and CIS: the three-way mistake construction firms cannot afford

Construction payroll risk often starts when VAT, PAYE and CIS are treated as separate issues.

They are not separate when the worker arrangement is wrong.

If the business describes the service one way for VAT, another way for PAYE and another way for CIS, the whole structure needs checking. HMRC will look at the real arrangement: the worker, the client, the supplier, the contract, the invoice, the payment route and the evidence behind the tax treatment.

The problem is especially sharp where labour is supplied into domestic construction or high-volume contractor environments and the paperwork is used to support a result that does not match reality.

If the worker is effectively controlled like an employee or labour-only subcontractor, but the paperwork is shaped to avoid VAT or shift responsibility, the business may be exposed. If the client asked for that model, or accepted it because it looked cheaper, the client may not be able to pretend it had no part in the risk.

Practical checks

• Does the VAT position match the real supply?
• Does the PAYE/CIS route match the worker status?
• Does the contract match what happens on site?
• Are invoices and bookkeeping consistent with the service delivered?
• Can the business prove who carried payroll responsibility?
• Would the directors be comfortable explaining why the model was chosen?

Genius can help construction businesses review VAT, PAYE, CIS, payroll records, bookkeeping, supplier contracts and HMRC-readiness before a problem becomes an enquiry.

If your labour model only works when nobody compares the contract to reality, call Genius.

Contact Genius: 0207 700 2000 / hello@geniusmoney.co.uk.