Moving from domestic to commercial work: what changes

Moving from domestic to commercial work changes how you get paid more than how you build. Domestic clients pay deposits and stages; commercial clients pay monthly in arrears after a valuation, hold back retention, deduct CIS and usually use the VAT reverse charge. You need cash to carry two or three months of wages and materials, plus tender, RAMS and insurance paperwork.

What changes day to day?

Mostly the money and the paperwork. The table sets out the usual differences; the contract on each job decides the detail.

How does payment work on commercial jobs?

You apply for payment, usually monthly, for the work done to date. The contractor values it, deducts retention and CIS, and pays a set number of days later. Construction contracts set due dates and use payment and pay less notices; see payment and pay less notices for how the deadlines work.

The effect is that you pay your team and your merchant before you're paid. That gap is what sinks firms moving up.

Worked example

Cash on a £60,000 three-month subcontract package

A groundworks package valued at £20,000 a month for three months. Each month: £9,000 labour, £8,000 materials and plant. Paid 30 days after each valuation, less 5% retention and 20% CIS on labour. Reverse charge, so no VAT changes hands.

Monthly costs, paid as you go£9,000 + £8,000	£17,000
Each monthly payment received£20,000 − £1,000 retention − £1,800 CIS	£17,200
End of month 1: costs paid, nothing in	−£17,000
End of month 2: month 1 paid, month 2 costs out−£17,000 + £17,200 − £17,000	−£16,800
End of month 3−£16,800 + £17,200 − £17,000	−£16,600
End of month 4: last payment in−£16,600 + £17,200	£600

For most of the job this firm is about £17,000 out of pocket. The profit is real but it arrives late: £8,400 of it sits with the contractor and HMRC. Plan for that before you sign, and see busy but broke and retentions.

What happens to VAT?

Usually the domestic reverse charge applies. If you and your customer are both VAT registered, the payment is reported under CIS and the customer hasn't told you in writing it's an end user or intermediary, you don't charge VAT on the invoice: the customer accounts for it. Your invoice must show that the reverse charge applies.

That's a cash change too. Domestic VAT you collected and held until your return no longer comes in. See the VAT domestic reverse charge and get your accountant to set up your invoicing before the first commercial invoice goes out.

What paperwork will you need?

More than for domestic work, and most of it before you're allowed on site. Main contractors check it when you go on their approved list and again for each job.

I don't know if I'm making money on jobs.

He said that before taking on bigger work, and it's the right worry. On commercial jobs you need to know your cost per job as it goes, because a loss shows up months later in the final account. See job costing for trades.

How do you price commercial work differently?

From drawings and a specification, often against a bill of quantities, and usually against other firms on price and quality. You'll need to measure from PDFs and build rates up from your own costs.

Two problems are common at the start. A firm can pay a QS £1,200 or more plus VAT to price one large commercial tender, then lose it. Or turnover grows faster than the systems the firm runs on. Learn to measure PDF drawings, read the tender pack quickly, and understand how 70/30 tenders are scored before paying for help on every bid.

Put your assumptions in writing with each price: see tender qualifications and exclusions.

How do you get your first commercial job?

Through a main contractor's approved subcontractor list, a small public contract, or a business client you already know. Start with a package you can fund and deliver comfortably.

1. Pick one sector you know.

   Fit-outs, schools, care homes or housing repairs. Your domestic photos will count for more in a similar setting.

2. Get the paperwork in order first.

   Insurance, CIS, VAT, RAMS and one accreditation.

3. Approach two or three local main contractors.

   Ask to be added to their subcontractor list. See getting on approved subcontractor lists.

4. Register on Find a Tender.

   For small public work, see the Procurement Act guide for small contractors.

5. Price the first job carefully and check the cash.

   Use the example above with your own numbers.

6. Keep one or two domestic jobs going.

   Their deposits help carry the commercial gap.

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Where Nexley fits

Nexley is the AI back office for UK trade firms: five AI assistants run your tenders, quotes, buying, scheduling and invoicing. It connects to the tools you already work in, you run it all from WhatsApp, and you approve everything. £799 a month.

For commercial work, Nexley reads the tender pack you forward on WhatsApp, pulls out payment terms, retention and the form of contract, takes off quantities and prices the package from your rates. Once you win, it drafts monthly applications for payment and tracks what's been paid and held back. You approve every price and every application.

Start 7 days freeSee AI tendering

Common questions

Sources

1. GOV.UK: What you must do as a CIS subcontractor
2. GOV.UK: CIS, make deductions and pay subcontractors
3. GOV.UK: How to use the VAT reverse charge if you supply building and construction services
4. GOV.UK: VAT for builders
5. GOV.UK: Employers' liability insurance

Every rule, rate and date above was checked against these sources on the date shown at the top.