Construction finance FAQ
Short, plain answers to the money questions builders ask most. This is general guidance, not tax or legal advice. Check anything important with your accountant.
What is retention, and when is it paid back?
Retention is money the client holds back from each payment, usually 3–5%, as security against defects.
- Half is often released at practical completion
- The rest is released after the defects period, often 12 months
- Your contract sets the exact percentage and dates
- SiteLedger's payment schedule shows what's held on each job
How do CIS deductions work?
Under the Construction Industry Scheme, contractors take tax off subcontractors' labour payments and pay it to HMRC.
- 20% for registered subcontractors, 30% if not registered
- Gross payment status means no deduction
- Deductions apply to labour, not materials
- Contractors file a monthly CIS return
How do I write a construction invoice?
A clear invoice gets paid faster. Include:
- Your business details and an invoice number
- Client name, site address and job reference
- Work done, with labour, materials and variations listed separately
- Net, VAT (or reverse charge note) and total due
- Retention and CIS deductions shown, plus payment terms
What is a variation, and how do I price one?
A variation is any change to the agreed work. Price it the same way as the original quote.
- Get the change confirmed in writing before starting
- Price labour, materials and plant, then overhead and profit
- Note any extra time needed
- Approved variations in SiteLedger update the contract value
How do I keep project costs under control?
Record costs as they happen, not at the end of the job.
- Compare spend against the quote every week
- Log labour, plant and materials against the right job
- Chase variations and invoices promptly
- Use SiteLedger's cost ledger to see real margin live
Common questions
Is retention the same as a deposit?
No. A deposit is paid to you up front. Retention is held back from you and released later.
Does CIS apply to VAT?
No. CIS is worked out on the labour amount before VAT. The domestic reverse charge for VAT is a separate rule.
Can SiteLedger give tax advice?
No. SiteLedger helps you record and track figures. For tax decisions, speak to an accountant.