1. Introduction – Why CIS & VAT Trip Up So Many Plumbers
If you’re a plumbing or heating engineer, you didn’t start your business to become a tax expert. You’re a problem-solver—you install heating systems, repair leaks, keep homes warm, and keep businesses running.
But two small acronyms routinely cause big headaches: CIS (Construction Industry Scheme) and VAT (Value Added Tax).
Get them wrong, and you could lose thousands—or even face penalties from HMRC.
Get them right, and you stay compliant and potentially keep more money in your pocket.
At Hammond & Co, we specialise in helping plumbing and heating engineers stay on top of CIS and VAT without the stress. This guide breaks everything down in simple terms, highlights the common pitfalls, and explains how we make compliance easy.
2. What CIS Actually Means
The Construction Industry Scheme (CIS) is HMRC’s method for making sure tax is collected from subcontractors in the construction sector—which includes plumbing and heating engineers.
Under CIS:
- Contractors deduct tax from payments to subcontractors
- These deductions are sent to HMRC
- The amounts deducted count as advance tax and NI payments
In this industry, you may be:
- A subcontractor working for a builder or main contractor
- A contractor when you bring in other trades to help you
CIS is not optional. If you work in the trade, you must be registered correctly and understand your role on every job.
3. Common Mistakes Engineers Make Under CIS
Here are the pitfalls we see most often:
Not registering properly
If you don’t register as a subcontractor, contractors must deduct 30% instead of 20%. That’s a huge cash flow hit.
Incorrect deductions
Contractors sometimes calculate deductions incorrectly. If you’re not checking statements, you can lose money quickly.
Not claiming rebates
Most subcontractors overpay through CIS—but many don’t claim the refunds they’re owed.
Admin overload
Contractors must verify subcontractors, file monthly CIS returns, and pay HMRC on time. Miss a deadline and penalties apply.
CIS can feel overwhelming—but with the right support, it becomes manageable and often works in your favour.
4. VAT in the Trade
VAT adds another layer of complexity for plumbers and heating engineers because different types of work can trigger different rules.
Key thresholds and schemes
- If your turnover exceeds £90,000 (2024/25), VAT registration is mandatory
- You can voluntarily register earlier (often helpful if you buy vans, tools, or materials)
- The Flat Rate Scheme may reduce admin and save money—but only in the right circumstances
Common complications
- Labour vs materials split – Incorrectly splitting these can cause big VAT errors
- Domestic vs commercial – VAT rules differ depending on the customer
- Reverse charge VAT – Since 2021, some B2B construction services require the reverse charge, meaning you don’t charge VAT—the contractor accounts for it instead
HMRC expects total accuracy—even though the rules can be confusing.
5. Complexities You Can’t Ignore
CIS and VAT often overlap in ways that can trip you up:
- You issue an invoice
- It includes labour and materials
- CIS applies to labour only
- VAT applies to the whole amount
- Sometimes reverse charge rules must be applied
One small mistake can mean undercharging a client—or overpaying HMRC. Neither is good for business.
6. Hammond & Co’s Approach – Making CIS & VAT Stress-Free
This is where having an accountant who understands the trade makes all the difference.
At Hammond & Co, we take care of:
CIS
- Full CIS registration
- Monthly CIS returns filed on time
- Ensuring contractors deduct the correct amounts
- Making sure you receive rebates you’re owed
VAT
- Advising when to register (or whether you should)
- Choosing the right VAT scheme
- Filing VAT returns accurately
- Ensuring full compliance with reverse charge rules
We do the heavy lifting so you can focus on the work that pays the bills.
7. How We Ensure Engineers Don’t Overpay Tax
Every pound counts in the trades. That’s why our process focuses on making sure you only pay what you owe—never more.
We help by:
- Checking CIS deductions against your records
- Tracking all allowable expenses (van costs, tools, mileage, insurance, even uniform laundry)
- Reviewing VAT schemes regularly for cost savings
- Running Month-9 forecasts so you can reduce tax before the year ends
A bit of forward planning can save you a lot of money.
8. Tools We Use (Dext, Xero CIS Modules, BrightPay)
We use smart tools to make your finances as simple as possible:
- Xero – Handles CIS and VAT seamlessly
- Dext / Hubdoc – Snap a receipt and it’s automatically logged
- BrightPay – Ideal for subcontractor payments and CIS deductions
This keeps your records accurate and up to date—and gives you real-time financial clarity.
9. Case Study – A CIS Rebate in Action
Here’s a real example (details changed for privacy):
Tom, a heating engineer in Derbyshire, was working as a subcontractor for several contractors. He was having 20% deducted on every payment but wasn’t tracking his expenses properly.
By year-end, he had unknowingly overpaid almost £7,000 in tax.
When he joined Hammond & Co, we:
- Registered him properly for CIS
- Collected all his allowable expenses
- Filed everything accurately
Outcome: Tom received a £7,000 rebate within weeks.
He used it to upgrade his van and take his family on holiday.
His feedback:
“I had no idea I was owed anything. Hammond & Co handled everything and got me a rebate I never expected. I won’t try to deal with CIS alone again.”
10. Call to Action – Don’t Miss Out on Rebates or Risk Mistakes
CIS and VAT don’t have to be complicated or stressful. With the right accountant, they can work for you—not against you.
At Hammond & Co, we help plumbing and heating engineers:
✔ Stay fully compliant with HMRC
✔ Claim every possible rebate and deduction
✔ Choose the right VAT scheme
✔ Avoid costly mistakes and penalties
✔ Keep more of the money they earn
Your job is keeping homes warm and water flowing.
Ours is keeping your finances watertight.
Ready for stress-free CIS & VAT? Contact Hammond & Co for a free consultation today.