2019 UK Construction Sector Report

Providing a national outlook on the UK construction sector

Our Construction & Real Estate team have worked together to provide a national outlook on the UK construction sector.

Read our 2019 MHA UK Construction Sector Report

This report analyses operating and accounts data from over 2,100 construction companies and compares companies within six turnover brackets (£5m-10m, £10m-25m, £25m-100m, £100m-150m, £150m-200m and £200m+), allowing you to benchmark your own performance with similar sized businesses.

The report provides an insight into how the construction sector has performed over the past three years and how we expect the sector to perform in the near future, offering guidance about what you can do to maximise opportunities.

Some headline Key Findings:

  • Turnover growth continues to slow with larger firms hit hardest
  • Year on year decline puts squeeze on profit margins
  • Sales cool as depressed demand and Brexit uncertainty bites
  • Stalling profits highlight potential labour costs exposure

We have also included insightful regional analysis, allowing you to see how your geographical region is performing compared to others. The report focuses on the following regions: East of England, London, Midlands, North East, North West, South East, South West, Yorkshire, Scotland and Wales.

Get in contact:

We hope you find our publication useful and if there is anything that you would like to discuss further, please do not hesitate to get in touch with a member of our Construction & Real Estate Team.

Our annual CSR results for 2019 are in!

We have had another fantastic year at MHA Moore & Smalley. After sending out the survey to over 4200 clients, we have received an overall satisfaction score of 96%, a 1% increase on last years, already great, result.

This score is based on clients’ answers in response to questions that rate us in terms of communication, technical ability, commitment to each individual business, and our CRM.

Thank you to everyone who got involved. Delivering outstanding client service is at the heart of everything we do. Therefore it is wonderful to know that we are delivering on our mission, vision and values, as we continue to improve and strive to be the best we can be.

Take a look at this year’s results below

VAT and Residential Property

Following on from our previous construction and real estate video, today we are focusing in on VAT in residential property development.

Clients should be considering:

– How to go about incurring little VAT in the construction phase

– Minimising working capital

– Getting cash flow projections correct

– What classes as zero rated and where will VAT be charged

Watch what experts Jonathan Main and Joe Sullivan have to say…

Minimum Energy Efficiency Standards (MEES) and their impact on financial statements

In this video, Paul Williams, Partner at MHA Moore and Smalley talks about the impact Minimum Energy Efficiency Standards (MEES) have on financial statements for companies that own and let investment properties.

Paul gives an overview of the regulations, he describes which properties are affected and explains how and why this impacts the financial statements of a company.

VAT Planning ahead of Land and Property Developments

A recent Upper Tribunal case between The Glasgow School of Art v HMRC highlighted the need to review VAT implications before renovating or developing a building and/or land.

The Background

The school was undertaking a project of the partial demolition, reconstruction and refurbishment of a building (Assembly Building) and the construction of a new building (Reid Building). The project was to be undertaken at the same time and the finished structure would be the Reid Building wrapping around and above the Assembly Building. There would be one wall of the Reid Building that would rest on the Assembly Building.

The Assembly Building was designed as a Students Union with bar and club (a taxable business). The Reid is managed by the School and serves several art school functions (a charity with Exempt supplies).

In order to receive funding, there had to be a ‘physical and useable link between the Assembly Building and the Reid Building.’ The design was therefore amended to include a single door connecting the two buildings.

VAT Implications

The Glasgow School of Art believed that the two buildings are separate and capable of being and were operated independently. In practical terms, there is no access between them as the single door is not used. They had different appearance, functions and opening times and a separate occupation. The school wanted and obtained two separate premises with different purposes.

The school put forward that all the Input Tax relating to the VAT incurred on costs relating to the Assembly Building should be claimed.

Appeal Decision

HMRC, the First Tier Tribunal and the Upper Tribunal determined that the builds are classed as one building and the construction was a single supply for VAT purposes. The reasons including:

  • a single price was charged by the construction company under a single contract
  • the funding was required for the project as a whole
  • the planning application was for both buildings
  • there has always been a physical link (internal door)
  • the whole construction was viewed as a single project
  • the site was repeatedly described as ‘the Reid Building’
  • there is no evidence that the Reid Building could have been constructed without the Assembly Building.

Although the school wanted and obtained two separate premises with different functions, this does not mean that there are two separate supplies for VAT purposes. As the building related to both Taxable and Exempt supplies, the full amount of Input Tax relating to The Assembly building could not be claimed.

Further Advice

A different approach to the build before construction could have changed the number of supplies that were being made and therefore increase the amount of Input Tax that could have been claimed.

If you would like to discuss this article in more detail or you would like to speak with a member of our team, please on 01772 821021 to be put in contact with a member of our Specialist VAT Advisers team.

Tax services for commercial property lawyers

Construction and real estate is one of the largest sectors in the UK, the construction industry is also one of the most complex; there is a maze of regulations, uncertainties and risks to deal with.

Our specialist tax advisers truly understand the nature of the construction industry and the challenges faced by business owners in the sector to get it right, and reduce the risk of an investigation by HMRC.

We work with a wide range of clients in the construction sector – including commercial and residential developers, contractors, sub-contractors, civil engineers, and architects – guiding a business from start-up, through growth strategies and surviving a changing economy all the way to exit planning.

Our tax specialists are well placed to work with commercial property lawyers and our fact sheet sets out the specialist areas where our expertise can add value to the work done for clients.

VAT on commercial property transactions

In our latest video Jonathan Main, Partner and Joe Sullivan, Partner discuss the aspects of VAT that affect the construction and real estate sector.

This video covers the following;

  • Summarising commercial property
  • What are some of the principles of VAT relating to commercial property?
  • Whether or not to charge VAT on the rent on commercial properties
  • Option to tax
  • Transfers as a going concern
  • Do we want to recover VAT on construction cost going forward and if so, can we charge VAT to our tenants?
  • Commercial considerations that may affect the bottom line
  • The latest legislation regarding fraud

The Demise & Domino Effect

The demise of Carillion will not come as a surprise to many people. Over the years the UK construction industry has seen its fair share of troubles. Some have survived to fight another day but many have not, taking sub-contractors and other businesses with them when they fail.

Carillion were the second largest construction company in the UK but had crippling debt burdens which are widely reported to be of around £1.5 billion. A well-known name in the UK, people will recognise them as not only a construction company working on the likes of the Battersea Power Station redevelopment but they were also engaged in facilities management and maintenance as well as being a huge service provider to the public sector.

Carillion employed 43,000 people globally with half of those being in the UK. It expanded rapidly with operations across the world, most notably in the Middle East & Canada.

Click on the image below to read the full story:

carillion

Richard Miller is the Director & Head of TradeRisk Solutions at PIB Insurance.
For more information visit their website by clicking here.