Director Responsibilities and Fines for Non-Compliance

Introduction - Director Responsibilities

In construction and engineering, directors carry more than hard hats and decision-making power, they carry legal accountability.

Every missed filing, unpaid tax, and compliance breach falls back on the board. The penalties can hit both the company and the individual director personally, fines, disqualification, or worse, reputational damage that lingers longer than any project delay.

At Jones Financial Accounts (JFA), we see many directors who’ve grown their business quickly but haven’t strengthened the compliance systems behind it. This blog breaks down what every director needs to review, why compliance matters commercially, and how to avoid the financial and personal fallout of getting it wrong.

What You Need to Review

1. Statutory Filings and Tax Deadlines

Every construction and engineering director must meet core legal requirements:

• Companies House – file annual accounts and confirmation statements on time. Late filing = automatic penalties of £150–£1,500, and persistent offenders risk director disqualification.

  
  

• HMRC – submit Corporation Tax, VAT, PAYE/RTI, and CIS returns by their due dates. A late return can trigger penalties plus daily interest until resolved.

  
  

• Pensions & Payroll – employers must meet auto-enrolment duties and maintain PAYE compliance for every pay period.

  
  

If you’re struggling to track deadlines, set up a compliance calendar. JFA provides an automated version as part of our Finance Health Check tools so you never miss another filing.

2. Construction Industry Scheme (CIS) and VAT Reverse Charge

CIS is non-negotiable for contractors. File monthly returns by the 19th, deduct tax correctly, and keep digital proof of verification. Late submissions bring £100–£3,000 in penalties. Add to this the Construction VAT Reverse Charge, which shifts VAT responsibility between contractors, applying it incorrectly can lead to HMRC assessments and reputation damage with clients.

(See our blog: Avoiding CIS Penalties – What HMRC Is Looking For).

3. Accounting Records and Financial Controls

The Companies Act 2006 requires directors to maintain “adequate accounting records.” In real terms, this means you must track:

• Job costs, stage payments, and retentions.

• Cash flow and debtor ageing.

• Monthly management accounts to evidence solvency.

  
  

A failure to keep accurate records can result in personal liability, especially if insolvency occurs.

4. Health, Safety and Environmental Responsibility

Under the CDM Regulations (2015), directors are responsible for ensuring competent management systems exist for health and safety. Breaches can lead to personal prosecution, especially when accidents occur due to systemic negligence.

5. Solvency and Director Conduct

Directors must act in the company’s best interest, not continue trading while insolvent (“wrongful trading”). If creditors suffer losses because you ignored cash flow warnings, you can be held personally liable.

JFA recommends running a 13-week rolling cash forecast (free template here) to monitor solvency in real time.

Why It Matters for Businesses

Commercial Impact

Compliance isn’t just about ticking boxes. It:

• Protects your business credit rating, crucial when applying for trade accounts or finance.

• Builds trust with main contractors and clients who perform due diligence before awarding projects.

• Avoids HMRC scrutiny that can stall growth plans or acquisitions.

• Frees up directors to focus on strategy rather than firefighting fines.

  
  

(Explore how visibility improves control in our related blog: How Management Accounts Help You Make Smarter Business Decisions).

Strategy to Get It Right

Board Level – Set the Culture

• Publish a compliance calendar showing all statutory and HMRC deadlines.

• Schedule monthly management reviews that include compliance status and cash forecasts.

• Assign a board-level compliance owner, not just “the accountant.”

  
  

Finance Department

• Build automated reminders in your accounting system for VAT, CIS, and payroll dates.

• Use management accounts to track solvency, ensure each director receives a summary cash flow statement monthly.

• Keep clear digital filing: VAT returns, CIS statements, PAYE reports, insurance, and contracts in one secure drive.

  
  

Operations and Project Teams

• Train site and project managers on recordkeeping, the wrong subcontractor paperwork can create HMRC risks.

• Ensure all variation and valuation paperwork is digitally stored; poor records mean unrecoverable costs.

• Build accountability by linking financial KPIs to compliance (e.g., “All supplier invoices must have a PO and job code”).

  
  

Practical Tools: Start with JFA’s free downloads — Cash Flow Forecast, CIS Compliance Checklist, and Credit Control Templates available at JFA Resources.

Common Mistakes

1. Late Filing of Accounts and Returns

   • Penalty: Up to £1,500 for Companies House and unlimited fines for persistent offenders.

   • Impact: Visible to lenders and clients; weakens credit rating.

     
     

2. VAT and CIS Errors

   • Penalty: 15–30% of underpaid tax + interest.

   • Impact: HMRC can suspend gross CIS status, costing up to 20% of your turnover in cash-flow loss.

     
     

3. No Management Accounts or Solvency Checks

   • Penalty: Personal liability if found trading wrongfully.

   • Impact: Directors can be banned up to 15 years and face court recovery actions.

     
     

4. Poor Recordkeeping

   • Penalty: Fine up to £3,000 per missing record or disqualification in severe cases.

   • Impact: Unable to prove compliance during audits or funding applications.

     
     

5. Health & Safety Oversight

   • Penalty: Unlimited fines or imprisonment for serious negligence under CDM regulations.

   • Impact: Long-term brand damage and loss of client trust.

Misconceptions (3 to Retire)

1. “My accountant handles everything, so I’m safe.”

   You remain legally responsible even if tasks are outsourced. Delegation ≠ liability transfer.

   
   

2. “Small fines don’t matter.”

   Repeated late filings build a compliance history that damages credit, confidence, and tender eligibility.

   
   

3. “If projects are profitable, I can deal with admin later.”

   Profit without compliance is like a scaffold without ties, it will collapse under pressure.

Why Professional Support Pays Off

At JFA, we don’t just handle compliance, we install systems that prevent non-compliance altogether.

Using our JFA Growth Finance Framework, we help construction and engineering firms:

• Build compliance calendars and dashboards that track deadlines and accountability.

• Set up monthly management accounts for real-time control and solvency assurance.

• Review VAT and CIS structures quarterly to avoid unexpected assessments.

• Implement cash-flow forecasting and board reporting for financial visibility.

  
  

We act as your fractional Finance Director, ensuring your business runs tight, efficient, and audit-ready at all times.

To get started, download your free CIS Compliance Pack or Cash Flow Forecast Template at JFA Resources.

Key Takeaways

• Directors are legally responsible for compliance, you can delegate tasks, not accountability.

• Missed filings, poor records, or VAT/CIS errors lead to personal and business penalties.

• Build systems that track obligations before HMRC or Companies House do.

• Professional financial oversight protects cash, reputation, and long-term growth.

Wrapping up today's insights, tomorrow we simplify another accounting challenge.