Home › Trades and building firms
Glossary
Glossary for trades and building firms: 16 terms in plain English
Each definition is taken from one of our guides, which gives the rule in full and where it comes from. The terms are in alphabetical order.
Amendment 4 (BS 7671)
The 2026 amendment to the wiring regulations, BS 7671:2018+A4:2026. It was published on 15 April 2026 and either version could be used for six months. NICEIC says the previous version is withdrawn on 15 October 2026, and condition reports carried out from that date are against Amendment 4.
Source: NICEIC, Understanding BS 7671:2018+A4:2026
Cancellation period
The 14 days a householder has to cancel a job agreed in their own home. If the firm does not give the cancellation information, the period runs for up to 12 months and 14 days, and the customer owes nothing for work already done.
Full guide: How to write a quote for a job: a worked electrical example and the cancellation trap
Source: Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, regulations 31 and 36
CIS monthly return
The return a contractor sends HMRC each month listing the subcontractors paid and the deductions taken. The tax month runs from the 6th to the 5th and the return is due by the 19th. A return one day late costs £100, and a month with no payments still needs a nil return.
Full guide: CIS monthly return: the 19th deadline and what a late one costs
Source: GOV.UK, CIS monthly returns
Construction Industry Scheme (CIS)
The HMRC scheme under which a contractor takes a deduction from the labour part of a subcontractor's payment and passes it to HMRC. The deduction is 20% if the subcontractor is registered, 30% if not and nothing if they have gross payment status. Materials and VAT are left out of the sum.
Free tool: CIS deduction calculator: what the contractor keeps and what you get paid
Source: GOV.UK, Construction Industry Scheme guidance
Day rate
What a self-employed tradesperson charges for a day on site. It has to cover the days that cannot be billed. Someone who wants £45,000 a year, has £12,000 of costs and loses three days a month to quoting can bill 194 days, which gives £323.20 a day before VAT with 10% added for bad debts.
Free tool: Day rate calculator for self-employed trades: what to charge a day to earn what you need
Source: Our own arithmetic, in tests/gaffer/tools-check.txt
Domestic reverse charge
A VAT rule for construction work between VAT-registered businesses inside CIS. The subcontractor shows the VAT on the invoice but does not collect it; the contractor accounts for it to HMRC. On a £3,800 invoice at 20% none of the £760 VAT changes hands. It does not apply to zero-rated work.
Free tool: CIS deduction calculator: what the contractor keeps and what you get paid
Source: GOV.UK, VAT domestic reverse charge for building and construction services
Electrical Installation Condition Report (EICR)
A report on the condition of an existing electrical installation, not a certificate for new work. It gives an overall result of satisfactory or unsatisfactory and codes each problem: C1 for danger present, C2 for potentially dangerous, C3 for improvement recommended and FI for further investigation.
Source: NICEIC, Understanding BS 7671:2018+A4:2026
Fixed fee for late payment
A set sum a business can claim on a late invoice owed by another business, on top of statutory interest, towards the cost of chasing it. The amount depends on the size of the debt: £40 on an £850 invoice and £70 on a £2,400 one.
Full guide: What late payment interest can a builder actually claim? Worked sums
Source: GOV.UK, late commercial payments
Gross payment status
A CIS status a subcontractor applies to HMRC for and has to keep qualifying for. A contractor pays a subcontractor with gross payment status in full, with no deduction. On a £3,800 invoice with £3,000 of labour that is £3,800 paid, against £3,200 for a registered subcontractor on 20%.
Free tool: CIS deduction calculator: what the contractor keeps and what you get paid
Source: GOV.UK, Construction Industry Scheme guidance
Letter before action
The last letter before a court claim, also called a letter of claim. To a householder or sole trader it must go by post with the protocol's information sheet, reply form and financial statement form, and no claim can be started until 30 days after the date on the letter.
Source: Pre-Action Protocol for Debt Claims
Minor works certificate
The Minor Electrical Installation Works Certificate, for small additions or alterations that do not add a new circuit, such as an extra socket on an existing circuit or a moved light switch. One certificate covers work on one circuit.
Source: NICEIC, Understanding BS 7671:2018+A4:2026
Qualifying income
The figure that decides whether a sole trader is in Making Tax Digital for Income Tax. It is turnover from self-employment and property before expenses, not profit. An electrician turning over £68,000 with £41,000 profit is over the £50,000 line and has been in the scheme since 6 April 2026.
Full guide: Making Tax Digital for sole-trader trades: are you in, and what is due on 7 November
Source: GOV.UK, Check if you're eligible for Making Tax Digital for Income Tax
Statutory interest
Interest a business can add to a late invoice owed by another business: 8% a year plus the Bank of England's Bank Rate. With Bank Rate at 3.75% that is 11.75% a year, or £46.36 on a £2,400 invoice 60 days late. It does not apply to a householder's bill.
Full guide: What late payment interest can a builder actually claim? Worked sums
Source: GOV.UK, late commercial payments; Late Payment of Commercial Debts (Interest) Act 1998
Statutory sick pay (SSP)
The minimum an employer must pay a worker who is off sick. Since 6 April 2026 it is due from the first full day of absence, at £123.25 a week or 80% of average weekly earnings if that is lower. On a five-day week that is £24.65 a day.
Full guide: Statutory sick pay from day one: what it costs a small trades firm since 6 April 2026
Source: GOV.UK, Statutory Sick Pay
VAT registration threshold
The £90,000 of taxable turnover above which a firm must register for VAT. The test is the last 12 months, checked at the end of every month, not a tax year. A firm that goes over must register within 30 days of the end of that month, and VAT starts on the first day of the second month after.
Full guide: When a tradesperson has to register for VAT: the rolling 12 months, worked through
Source: GOV.UK, VAT registration: when to register
Zero-rated new build
Building a new house is charged at 0% VAT. A VAT-registered subcontractor zero-rates the labour and the building materials, and the reverse charge does not apply. CIS is still deducted from the labour: on £4,000 labour and £1,500 materials a registered subcontractor is paid £4,700.
Full guide: New-build house at 0% VAT: does CIS still come off? One invoice worked through
Source: HMRC VAT Notice 708; GOV.UK CIS guidance
AEO Lookup editorial team
We write practical guides for people who run small UK firms, and we check every fact against its source on the date shown. Read how we review, or tell us if something has changed.