## 



Guide for contractors and subcontractors 

## Contents 1 Introduction To The Construction **Industry** Scheme **(Cis)**

|                 |              |     | What   |
|-----------------|--------------|-----|--------|
|                 |              |     |        |
| is              |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| Construction    |              |     |        |
|                 |              |     |        |
| Industry        |              |     |        |
|                 |              |     |        |
| Scheme?         |              |     |        |
|                 |              |     |        |
| 5               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| What            |              |     |        |
|                 |              |     |        |
| types           |              |     |        |
|                 |              |     |        |
| of              |              |     |        |
|                 |              |     |        |
| work            |              |     |        |
|                 |              |     |        |
| are             |              |     |        |
|                 |              |     |        |
| covered         |              |     |        |
|                 |              |     |        |
| by              |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme?         |              |     |        |
|                 |              |     |        |
| 5               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| What            |              |     |        |
|                 |              |     |        |
| types           |              |     |        |
|                 |              |     |        |
| of              |              |     |        |
|                 |              |     |        |
| businesses      |              |     |        |
|                 |              |     |        |
| are             |              |     |        |
|                 |              |     |        |
| covered         |              |     |        |
|                 |              |     |        |
| by              |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme?         |              |     |        |
|                 |              |     |        |
| 6               |              |     |        |
|                 |              |     |        |
|                 |              |     | How    |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme          |              |     |        |
|                 |              |     |        |
| operates        |              |     |        |
|                 |              |     |        |
| 7               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme          |              |     |        |
|                 |              |     |        |
| apply           |              |     |        |
|                 |              |     |        |
| to              |              |     |        |
|                 |              |     |        |
| employees?      |              |     |        |
|                 |              |     |        |
| 8               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| Can             |              |     |        |
|                 |              |     |        |
| a               |              |     |        |
|                 |              |     |        |
| subcontractor   |              |     |        |
|                 |              |     |        |
| apply           |              |     |        |
|                 |              |     |        |
| to              |              |     |        |
|                 |              |     |        |
| be              |              |     |        |
|                 |              |     |        |
| paid            |              |     |        |
|                 |              |     |        |
| gross?          |              |     |        |
|                 |              |     |        |
| 9               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| do              |              |     |        |
|                 |              |     |        |
| subcontractors  |              |     |        |
|                 |              |     |        |
| pay             |              |     |        |
|                 |              |     |        |
| tax?            |              |     |        |
|                 |              |     |        |
| 9               |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| subcontractors  |              |     |        |
|                 |              |     |        |
| set             |              |     |        |
|                 |              |     |        |
| off             |              |     |        |
|                 |              |     |        |
| deductions?     |              |     |        |
|                 |              |     |        |
| 9               |              |     |        |
|                 |              |     |        |
| Registering     |              |     |        |
|                 |              |     |        |
| for             |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme          |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 | ­ contractors |     |        |
|                 |              |     |        |
| 10              |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
|                 |              |     |        |
| Registering     |              |     |        |
|                 |              |     |        |
| for             |              |     |        |
|                 |              |     |        |
| the             |              |     |        |
|                 |              |     |        |
| scheme          |              |     |        |
|                 |              |     |        |
| ­ subcontractors |              |     |        |
|                 |              |     |        |
| 10              |              |     |        |
|                 |              |     |        |

 
   
   
 
   

  
 
 
This booklet is available in large print. If you would like a copy please contact your HM Revenue & Customs office. 



CIS Helpline minicom 0845 366 **7894** 


Yr Iaith Gymraeg/Welsh language. Ffoniwch 


0845 302 **1489** i dderbyn fersiynau 
   
   
Cymraeg o ffurflenni a chanllawiau. 

## 2 The Terms Used **Under** The **Scheme**

|                |     |     |     |
|----------------|-----|-----|-----|
|                |     |     |     |
| to             |     |     |     |
|                |     |     |     |
| the            |     |     |     |
|                |     |     |     |
| key            |     |     |     |
|                |     |     |     |
| terms          |     |     |     |
|                |     |     |     |
| 11             |     |     |     |
|                |     |     |     |
| Contractor     |     |     |     |
|                |     |     |     |
| 11             |     |     |     |
|                |     |     |     |
|                |     |     |     |
|                |     |     |     |
| Exceptions     |     |     |     |
|                |     |     |     |
| to             |     |     |     |
|                |     |     |     |
| the            |     |     |     |
|                |     |     |     |
| scheme         |     |     |     |
|                |     |     |     |
| for            |     |     |     |
|                |     |     |     |
| contractors    |     |     |     |
|                |     |     |     |
| 13             |     |     |     |
|                |     |     |     |
| Subcontractors |     |     |     |
|                |     |     |     |
| 15             |     |     |     |
|                |     |     |     |
| Payments       |     |     |     |
|                |     |     |     |
| 17             |     |     |     |
|                |     |     |     |
| Deductions     |     |     |     |
|                |     |     |     |
| 18             |     |     |     |
|                |     |     |     |
| Contracts      |     |     |     |
|                |     |     |     |
| 18             |     |     |     |
|                |     |     |     |
|                |     |     |     |
| Construction   |     |     |     |
|                |     |     |     |
| operations     |     |     |     |
|                |     |     |     |
| 18             |     |     |     |
|                |     |     |     |

## 3 How Payments Are **Made** To **Subcontractors**

|                 |        | The   |
|-----------------|--------|-------|
|                 |        |       |
| verification    |        |       |
|                 |        |       |
| process         |        |       |
|                 |        |       |
| 20              |        |       |
|                 |        |       |
|                 | Future |       |
|                 |        |       |
| verification    |        |       |
|                 |        |       |
| 26              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| Changing        |        |       |
|                 |        |       |
| a               |        |       |
|                 |        |       |
| subcontractor's |        |       |
|                 |        |       |
| payment         |        |       |
|                 |        |       |
| status          |        |       |
|                 |        |       |
| 26              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| a               |        |       |
|                 |        |       |
| payment         |        |       |
|                 |        |       |
| under           |        |       |
|                 |        |       |
| deduction       |        |       |
|                 |        |       |
| 27              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| Providing       |        |       |
|                 |        |       |
| documentary     |        |       |
|                 |        |       |
| evidence        |        |       |
|                 |        |       |
| of              |        |       |
|                 |        |       |
| a               |        |       |
|                 |        |       |
| deduction       |        |       |
|                 |        |       |
| 28              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| To              |        |       |
|                 |        |       |
| whom            |        |       |
|                 |        |       |
| should          |        |       |
|                 |        |       |
| payments        |        |       |
|                 |        |       |
| under           |        |       |
|                 |        |       |
| deduction       |        |       |
|                 |        |       |
| be              |        |       |
|                 |        |       |
| made?           |        |       |
|                 |        |       |
| 29              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| records         |        |       |
|                 |        |       |
| of              |        |       |
|                 |        |       |
| payments        |        |       |
|                 |        |       |
| 29              |        |       |
|                 |        |       |
|                 |        |       |
|                 |        |       |
| Summary         |        |       |
|                 |        |       |
| of              |        |       |
|                 |        |       |
| procedures      |        |       |
|                 |        |       |
| for             |        |       |
|                 |        |       |
| making          |        |       |
|                 |        |       |
| payment         |        |       |
|                 |        |       |
| to              |        |       |
|                 |        |       |
| a               |        |       |
|                 |        |       |
| subcontractor   |        |       |
|                 |        |       |
| 29/30           |        |       |
|                 |        |       |

## Contents **(Continued)**

|     |     |     |
|-----|-----|-----|

## 4 What We Require **From** Contractors

|             | Monthly   |
|-------------|-----------|
|             |           |
| returns     |           |
|             |           |
| 31          |           |
|             |           |
|             |           |
|             |           |
| errors      |           |
|             |           |
| on          |           |
|             |           |
| monthly     |           |
|             |           |
| returns     |           |
|             |           |
| 33          |           |
|             |           |
|             |           |
|             |           |
| payments    |           |
|             |           |
| to          |           |
|             |           |
| us          |           |
|             |           |
| 36          |           |
|             |           |
|             |           |
|             |           |
| setting     |           |
|             |           |
| off         |           |
|             |           |
| deductions  |           |
|             |           |
| 37          |           |
|             |           |
|             |           |
|             |           |
| Employer    |           |
|             |           |
| Annual      |           |
|             |           |
| Return      |           |
|             |           |
| ­ form       |           |
|             |           |
| P35         |           |
|             |           |
| 38          |           |
|             |           |
|             |           |
|             |           |
| of          |           |
|             |           |
| records     |           |
|             |           |
| 38          |           |
|             |           |
|             |           |
|             |           |
| Action      |           |
|             |           |
| we          |           |
|             |           |
| will        |           |
|             |           |
| take        |           |
|             |           |
| if          |           |
|             |           |
| contractors |           |
|             |           |
| do          |           |
|             |           |
| not         |           |
|             |           |
| operate     |           |
|             |           |
| the         |           |
|             |           |
| scheme      |           |
|             |           |
| properly    |           |
|             |           |
| 38          |           |
|             |           |

## 5 Businesses Not **Resident** In The Uk

|              | Non­resident   |
|--------------|---------------|
|              |               |
| businesses   |               |
|              |               |
| 41           |               |
|              |               |
|              |               |
|              |               |
| Non­resident  |               |
|              |               |
| individuals  |               |
|              |               |
| and          |               |
|              |               |
| partnerships |               |
|              |               |
| registering  |               |
|              |               |
| for          |               |
|              |               |
| CIS          |               |
|              |               |
| 41           |               |
|              |               |
|              |               |
|              |               |
| Non­resident  |               |
|              |               |
| companies    |               |
|              |               |
| registering  |               |
|              |               |
| for          |               |
|              |               |
| CIS          |               |
|              |               |
| 41           |               |
|              |               |
|              |               |
|              |               |
| Repayment    |               |
|              |               |
| of           |               |
|              |               |
| deductions   |               |
|              |               |
| where        |               |
|              |               |
| there        |               |
|              |               |
| is           |               |
|              |               |
| a            |               |
|              |               |
| Double       |               |
|              |               |
| Taxation     |               |
|              |               |
| Agreement    |               |
|              |               |
| 42           |               |
|              |               |
|              |               |
|              |               |
| Repayment    |               |
|              |               |
| of           |               |
|              |               |
| deductions   |               |
|              |               |
| where        |               |
|              |               |
| there        |               |
|              |               |
| is           |               |
|              |               |
| no           |               |
|              |               |
| Double       |               |
|              |               |
| Taxation     |               |
|              |               |
| Agreement    |               |
|              |               |
| 43           |               |
|              |               |

## 6 **Miscellaneous**

 
False declarations 
44 
 
 
Disputes about deductions 
44 


Use of trading names 
44 


Payments to third parties 
45 


Personal representatives, liquidators 
and receivers 
46 
 
   
Death of a contractor 
46 
 
   
Takeover of a business 
46 

  
 
Change of control of a close 
company 
47 
 
 
Change of address 
47 
 
 
Contras and set­offs 
47 


Paying subcontractors by credit 
or payment cards 
48 
 
Retention payments 
48 
 
Reverse premiums 
49 

  
 
 
Payments made under a Private 
Finance Initiative arrangement 
49 
 
Group companies 
50 
 
Managing agents 
50 
 
Scheme representatives 
50 
 
Unofficial forms 
51 

|              |                 |     |           |
|--------------|-----------------|-----|-----------|
|              |                 |     |           |
| scope        |                 |     |           |
|              |                 |     |           |
| of           |                 |     |           |
|              |                 |     |           |
| construction |                 |     |           |
|              |                 |     |           |
| operations   |                 |     |           |
|              |                 |     |           |
| 52           |                 |     |           |
|              |                 |     |           |
|              |                 |     | Contracts |
|              |                 |     |           |
| relating     |                 |     |           |
|              |                 |     |           |
| to           |                 |     |           |
|              |                 |     |           |
| construction |                 |     |           |
|              |                 |     |           |
| operations   |                 |     |           |
|              |                 |     |           |
| 52           |                 |     |           |
|              |                 |     |           |
|              | Construction    |     |           |
|              |                 |     |           |
| operations   |                 |     |           |
|              |                 |     |           |
| 54           |                 |     |           |
|              |                 |     |           |
|              |                 |     |           |
|              |                 |     |           |
| Construction |                 |     |           |
|              |                 |     |           |
| operations   |                 |     |           |
|              |                 |     |           |
| included     |                 |     |           |
|              |                 |     |           |
| within       |                 |     |           |
|              |                 |     |           |
| the          |                 |     |           |
|              |                 |     |           |
| scheme       |                 |     |           |
|              |                 |     |           |
| 54           |                 |     |           |
|              |                 |     |           |
|              | Non­construction |     |           |
|              |                 |     |           |
| operations   |                 |     |           |
|              |                 |     |           |
| 59           |                 |     |           |
|              |                 |     |           |

|         |
|---------|
|         |
| from    |
|         |
| Finance |
|         |
| Act     |
|         |
| 2004    |
|         |
| 63      |
|         |

## Contents **(Continued)** Appendix C

|              |     |     |        |      |
|--------------|-----|-----|--------|------|
|              |     |     |        |      |
| Contracts    |     |     |        |      |
|              |     |     |        |      |
| that         |     |     |        |      |
|              |     |     |        |      |
| include      |     |     |        |      |
|              |     |     |        |      |
| work         |     |     |        |      |
|              |     |     |        |      |
| that         |     |     |        |      |
|              |     |     |        |      |
| is           |     |     |        |      |
|              |     |     |        |      |
| included     |     |     |        |      |
|              |     |     |        |      |
| AND          |     |     |        |      |
|              |     |     |        |      |
| work         |     |     |        |      |
|              |     |     |        |      |
| that         |     |     |        |      |
|              |     |     |        |      |
| is           |     |     |        |      |
|              |     |     |        |      |
| excluded     |     |     |        |      |
|              |     |     |        |      |
| 65           |     |     |        |      |
|              |     |     |        |      |
|              |     |     | Status |      |
|              |     |     |        |      |
| of           |     |     |        |      |
|              |     |     |        |      |
| private      |     |     |        |      |
|              |     |     |        |      |
| householders |     |     |        |      |
|              |     |     |        |      |
| 65           |     |     |        |      |
|              |     |     |        |      |
|              |     |     |        | List |
|              |     |     |        |      |
| of           |     |     |        |      |
|              |     |     |        |      |
| included     |     |     |        |      |
|              |     |     |        |      |
| and          |     |     |        |      |
|              |     |     |        |      |
| excluded     |     |     |        |      |
|              |     |     |        |      |
| operations   |     |     |        |      |
|              |     |     |        |      |
| 65           |     |     |        |      |
|              |     |     |        |      |

|                  |          |         |         |
|------------------|----------|---------|---------|
|                  |          |         |         |
| Examples         |          |         |         |
|                  |          |         |         |
| of               |          |         |         |
|                  |          |         |         |
| deductions       |          |         |         |
|                  |          |         |         |
| from             |          |         |         |
|                  |          |         |         |
| subcontractors'  |          |         |         |
|                  |          |         |         |
| payments         |          |         |         |
|                  |          |         |         |
| 72               |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
| at               |          |         |         |
|                  |          |         |         |
| the              |          |         |         |
|                  |          |         |         |
| standard         |          |         |         |
|                  |          |         |         |
| rate             |          |         |         |
|                  |          |         |         |
| 72               |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
| at               |          |         |         |
|                  |          |         |         |
| the              |          |         |         |
|                  |          |         |         |
| higher           |          |         |         |
|                  |          |         |         |
| rate             |          |         |         |
|                  |          |         |         |
| 75               |          |         |         |
|                  |          |         |         |
|                  | Appendix |         |         |
|                  |          |         |         |
| E                |          |         |         |
|                  |          |         |         |
|                  |          |         | Example |
|                  |          |         |         |
| payment          |          |         |         |
|                  |          |         |         |
| and              |          |         |         |
|                  |          |         |         |
| deduction        |          |         |         |
|                  |          |         |         |
| statement        |          |         |         |
|                  |          |         |         |
| 78               |          |         |         |
|                  |          |         |         |
|                  |          | Getting |         |
|                  |          |         |         |
| advice           |          |         |         |
|                  |          |         |         |
| 79               |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
| Your             |          |         |         |
|                  |          |         |         |
| rights           |          |         |         |
|                  |          |         |         |
| and              |          |         |         |
|                  |          |         |         |
| responsibilities |          |         |         |
|                  |          |         |         |
| 79               |          |         |         |
|                  |          |         |         |
|                  |          |         |         |
| How              |          |         |         |
|                  |          |         |         |
| we               |          |         |         |
|                  |          |         |         |
| use              |          |         |         |
|                  |          |         |         |
| your             |          |         |         |
|                  |          |         |         |
| information      |          |         |         |
|                  |          |         |         |
| 79               |          |         |         |
|                  |          |         |         |
| Index            |          |         |         |
|                  |          |         |         |
| 80               |          |         |         |
|                  |          |         |         |

## 1 Introduction To The Construction Industry Scheme (Cis)


  

  
 
This chapter gives a brief introduction to the scheme and tells you where you can find more detailed information later in the guide. 

|       |
|-------|
|       |
| is    |
|       |
| the   |
|       |
| 1.1   |
|       |

 

Construction Industry **Scheme?** 

  

The scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses. 

|     |     |     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|-----|-----|
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |

Under the scheme, all payments made from contractors to subcontractors must take account of the subcontractor's tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to us, from that part of the payment that does not represent the cost of materials incurred by the subcontractor. 

What **types** of 
1.2 

  


work are covered by the 
scheme? 

The scheme covers all construction work carried out in the United Kingdom (UK), including jobs such as: 
- site preparation - alterations - dismantling - construction - repairs - decorating - demolition. 



The UK includes United Kingdom territorial waters up to the 
12­mile limit. 

  

  


The scheme does not apply to construction work carried on 
outside the UK. However, a business based outside the UK and 
carrying out construction work within the UK is within the 
scheme and must register accordingly. 

  

  
   
   

  


More *information*  
There is more information on the scope of the scheme in 
paragraphs 2.41 to 2.45 and in Appendix A. There is more 
information on businesses not resident in the UK at Chapter 5. 


What types of 
businesses are 
covered by the 
scheme? 

 

The scheme covers all types of businesses and other concerns 
that work in the construction industry, including: 
- companies 
- partnerships 
- self­employed individuals. 

 

 

These businesses can be: 
- contractors - subcontractors - contractors and subcontractors. 

  


Under the scheme, the terms 'contractor' and 'subcontractor' have special meanings that cover more than is generally referred to as 'Construction'. 

 
     


Contractor A contractor is a business or other concern that pays subcontractors for construction work. 


  


Contractors may be construction companies and building firms, but may also be government departments, local authorities and many other businesses that are normally known in the industry as 'clients'. 


  
 
 
Some businesses or other concerns are counted as contractors if their average annual expenditure on construction operations over a period of three years is £1m or more. 



Private householders are not counted as contractors so are not covered by the scheme. 

 
     

  
Subcontractor A subcontractor is a business that carries out construction work for a contractor. 

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Businesses that are contractors and **subcontractors** 
Many businesses pay other businesses for construction work, but are themselves paid by other businesses too. When they are working as a contractor, they must follow the rules for contractors and when they are working as a subcontractor, they must follow the rules for subcontractors. 

 
 
More *information* 
   

    

  


For a more detailed explanation of what is a contractor and what is a subcontractor, see Chapter 2. 

|          |     | How   |
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Registering for the **scheme** 
All contractors must register with us for the Construction Industry Scheme. Subcontractors who do not wish to have deductions made from their payments at the higher rate of deduction should also register with us. We will provide registration details that contractors and subcontractors will need to use when they deal with payments. 

 
More *information* 


For information on when and how to register, see paragraphs 1.16 to 1.21. 

1.8 
 
   

  
 
   

  

  

Verifying **subcontractors** 
Before a contractor can make a payment to a subcontractor for construction work, they may need to verify with us that the subcontractor is registered. We will check whether the subcontractor is registered with us and then tell the contractor the rate of deduction they must apply to the payment, or whether the payment can be made without any deductions. 

 
More *information* 

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Making deductions from **payments** 
Under the scheme, all payments made from contractors to subcontractors, must take account of the subcontractors' tax status. This may require the contractor to make a deduction, which they then pay to us from that part of the payment that does not represent the cost of materials incurred by the subcontractor. 


  

  
If no deduction is required, the contractor can make the payment to the subcontractor in full. 

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If a deduction is required, the contractor must: 
-  calculate the deduction -  make the deduction -  record details of the payment, materials and deduction 
-  make the net payment to the subcontractor 
-  complete and give the appropriate statement of deduction to 
the subcontractor. 
 
More *information* 

  


For more information on making a payment, see paragraphs 3.20 to 3.30 

Returns Each month, contractors must send us a complete return of all the payments they have made within the scheme or report that they have made no payments. The return will include: 
- details of the subcontractors 
- details of the payments made, and any deductions withheld 
-  a declaration that the employment status of all subcontractors has been considered 


  

-  a declaration that all subcontractors that need to be verified 
have been verified. 
 
More *information* 

  


For more information on completing a return, see paragraphs 4.2 
to 4.29. 

1.11 

  

  

Payments to HM Revenue & **Customs** 
Each month, or quarter in some cases, contractors must send us a payment for the deductions they have made from subcontractors. 

 
More *information* 


For more information on payments to us, see paragraphs 4.30 
to 4.36. 

Does the 
1.12 

|     |     |
|-----|-----|
|     |     |
|     |     |

scheme **apply** 
to **employees?** 

   

  

  

For a contract to be within the scheme, it must not be 'a contract of employment'. This means that the scheme applies to workers who are self­employed under the terms of the contract, and who are not employees subject to Pay As You Earn (PAYE). 

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Employment status depends on general law and it is for the contractor to decide on the individual's employment status when the subcontractor is first engaged. The fact that the subcontractor has worked in a self­employed capacity before is irrelevant in deciding on their employment status - it is the terms of the particular engagement that **matter.** 

 
More *information* 

  
   


More detailed advice for contractors is given in Factsheet ES/FS2 
Are your workers employed or self­employed for tax and *National* 
Insurance *contributions.* 


You can also get advice from the internet at 
www.hmrc.gov.uk/employment­status 

 
Can a 
1.13 
Subcontractors can apply to be paid gross - with no deductions  
subcontractor 
taken from their payments. To do this, subcontractors will need to  


  


apply to be **paid** 
show us that they meet certain qualifying conditions.  
gross?  

 
More *information* 
Further information on how to apply to be registered for gross 

  


payment is available from the internet, go to 
www.hmrc.gov.uk/cis 


  

  

1.14  
Subcontractors have to make a return of their profits each year, 
and their tax liability is based on that return. 

 
How do subcontractors pay **tax?** 

  

  

  
     

  
 

A subcontractor may already have paid tax by payments on account or had deductions made, as shown on the payment and deduction statements given to them by their contractors. If the amount already paid or deducted is greater than the amount due, we will repay the excess. If there is a shortfall, then the subcontractor must make a balancing payment. 

 
Can subcontractors set off deductions? 

1.15  
Subcontractors that are limited companies can set off deductions 
they bear on their receipts against the following sums payable 
to us. 
- Pay As You Earn (PAYE) tax due from the company's employees. 
- Employers' and employees' National Insurance contributions 
(NICs) due. 

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|    |    |     |     |     |     |     |     |     |     |

- Student Loan repayments due from the company's employees. 
- Construction Industry Scheme (CIS) deductions made from the 
company's subcontractors. 


The company will need to reduce the amount of PAYE, NICs, Student Loan repayments and any CIS deductions that the company pays by the amount of CIS deductions made from the company's income. 


If, for any month or quarter, the company's own CIS deductions are greater than the PAYE, NICs, Student Loan repayments and CIS 
liabilities payable, the company should set off the excess against future payments in the same tax **year.** 


At the end of the tax year, once we have received the company's P35 annual return, any excess CIS deductions that cannot be set off may be refunded or set against Corporation Tax due. No repayments or set­offs against other liabilities can be made in­year. 


  

Companies must keep a record of the amounts set off so they can complete their annual employer returns. Companies may keep their own records for this purpose or they may use form CIS132 
Record of amounts *set­off*. You can download this form at www.hmrc.gov.uk/cis 


Registering for the **scheme** - 
contractors 

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|    |    |    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |    |    |     |     |

1.16 
When to **register** 
When you are about to take on and pay your first subcontractor, regardless of whether that subcontractor is likely to be paid gross or under deduction. 



1.17 
How to register and more **information** 
To register, or request more information, please contact us. 



Phone: 
New Employer Helpline on 0845 60 70 143. 

Internet: 
www.hmrc.gov.uk/employers 

  

  
 
   


1.18 
What happens **next** 
We will set up a Contractor Scheme (and a PAYE Scheme if you have asked us to) and send you all the information you need. 


  


1.19 
When to **register** 
When you, your firm, or your company is about to start work within the construction industry. 

Registering for the **scheme** - subcontractors 

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|    |    |    |    |     |     |     |     |     |
|    |    |    |    |     |     |     |     |     |

1.20 
How to register and more **information** 
To register, or request more information, please phone the CIS Helpline on 0845 366 **7899.** 


1.21 
What happens **next** We will write and confirm your registration and tell you what information you will need to give to your contractors before they pay you. 



If you are not already known to us, we may also ask you to satisfy an identity check. 

## 2 The Terms Used Under The Scheme

Introduction to 
2.1 
Under the scheme, a contractor has to make a deduction in 


 
 
   

  

  
   
   


the key **terms** 
certain situations when making a payment to a subcontractor 
under a contract that covers construction operations. 


2.2  
The rest of this chapter gives more information on the terms used 
under the scheme. 

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| Payments       |     |     |     |     |     |
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| to             |     |     |     |     |     |
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| 2.35           |     |     |     |     |     |
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| Deductions     |     |     |     |     |     |
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| Contracts      |     |     |     |     |     |
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| 2.40           |     |     |     |     |     |
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| Construction   |     |     |     |     |     |
|                |     |     |     |     |     |
| operations     |     |     |     |     |     |
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| 2.45           |     |     |     |     |     |
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| Appendix       |     |     |     |     |     |
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| Contractor     |     |     |     |     |     |
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| Under          |     |     |     |     |     |
|                |     |     |     |     |     |
| the            |     |     |     |     |     |
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| scheme,        |     |     |     |     |     |
|                |     |     |     |     |     |
| the            |     |     |     |     |     |
|                |     |     |     |     |     |
| term           |     |     |     |     |     |
|                |     |     |     |     |     |
| 'contractor'   |     |     |     |     |     |
|                |     |     |     |     |     |
| has            |     |     |     |     |     |
|                |     |     |     |     |     |
| a              |     |     |     |     |     |
|                |     |     |     |     |     |
| special        |     |     |     |     |     |
|                |     |     |     |     |     |
| meaning        |     |     |     |     |     |
|                |     |     |     |     |     |
| that           |     |     |     |     |     |
|                |     |     |     |     |     |
| is             |     |     |     |     |     |
|                |     |     |     |     |     |
| much           |     |     |     |     |     |
|                |     |     |     |     |     |
| wider          |     |     |     |     |     |
|                |     |     |     |     |     |
| than           |     |     |     |     |     |
|                |     |     |     |     |     |
| it             |     |     |     |     |     |
|                |     |     |     |     |     |
| normally       |     |     |     |     |     |
|                |     |     |     |     |     |
| has            |     |     |     |     |     |
|                |     |     |     |     |     |
| in             |     |     |     |     |     |
|                |     |     |     |     |     |
| the            |     |     |     |     |     |
|                |     |     |     |     |     |
| construction   |     |     |     |     |     |
|                |     |     |     |     |     |
| industry.      |     |     |     |     |     |
|                |     |     |     |     |     |
| 2.4            |     |     |     |     |     |
|                |     |     |     |     |     |
|                |     |     |     |     |     |
|                |     |     |     |     |     |
|                |     |     |     |     |     |
|                |     |     |     |     |     |
|                |     |     |     |     |     |

A contractor is a business or other concern that pays 
subcontractors for construction work. Under the scheme, there 
are two groups of contractors: 
- 'mainstream' contractors 
- 'deemed' contractors. 

2.5 
'Mainstream' **contractors** 
'Mainstream' contractors include the following. 
- Any businesses that include construction operations and pay 
others for work carried out under the scheme. 
There is more information on construction operations in 
paragraphs 2.41 to 2.45 and Appendix A. 

- Any property developers or speculative builders, erecting and 
altering buildings in order to make a profit. 
- Gang­leaders organising labour for construction work. 
A gang­leader will also be a subcontractor. There is more 
information on gang­leaders in paragraphs 2.32 and 2.33. 


  

  

  

  

  
 
   

  

- Foreign businesses that carry out construction operations in 
the UK or within UK territorial waters (up to the 12­mile limit). 
2.6 


'Deemed' **contractors** 
Under the scheme, some businesses, public bodies and other concerns outside the mainstream construction industry but who regularly carry out or commission construction work on their own premises or investment properties are deemed to be contractors. 

2.7 

  

  


These concerns are deemed to be contractors if their average annual expenditure on construction operations in the period of three years ending with their last accounting date exceeds £1m. 

2.8 

  


If these concerns have not been trading for the whole of the last three years, they are contractors if their total expenditure on construction operations for the part of that period of three years during which they were trading exceeds £3m. 

2.9 


  

  

  

  
   

  

Any concern that is deemed to be a contractor because one of the above conditions is met will continue to be deemed a contractor until it can satisfy us that its expenditure on construction operations has been less than £1m in each of three successive years. 

2.10 
The following bodies or businesses are examples of those that are 
'deemed' to be contractors if they spend an average of more than 
£1m a year on construction operations. 
- Non­construction businesses such as large manufacturing 
concerns, departmental stores, breweries, banks, oil companies 
and property investment companies. 
- Local authorities. 
- Development corporations or new town commissions. 
- The Commission for the New Towns. 
- The Housing Corporation, housing associations, housing trusts, 
Scottish Homes and the Northern Ireland Housing Executive. 
- Any public bodies named in the regulations, such as National 
Health Trusts or Health and Social Services Trusts. 
- Public offices or Departments of the Crown (including any 
Northern Ireland department and any part of the 
Scottish Administration). 
- The Corporate Officer of the House of Lords, the Corporate 


  

  

  


Officer of the House of Commons and the Scottish 
Parliamentary Body. 

 
More *information* 


For more information on deemed contractors, see Appendices A, B and C. 

Businesses and individuals that are NOT contractors **under** 
the **scheme** 
Under the scheme, the following businesses and individuals are 
not contractors. 
- Ordinary householders that are having work done on their own 
premises, such as new house building, decoration, repairs or 
an extension. 


- Businesses which do not include construction operations whose 
average annual expenditure on construction work over the last 
three years has been less than £1m. 
 
More *information* 

  


If you are unsure whether you are a contractor under the scheme, phone the CIS Helpline on 0845 366 **7899**. 

2.12 

## Exceptions To The Scheme For Contractors

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Under the scheme, businesses and other concerns that are otherwise mainstream or deemed contractors may not need to apply the scheme for certain types of work. Some typical cases are explained in paragraphs 2.13 to 2.22. 

## 2.13 Expenditure Incurred By Certain Businesses On **Their** Own **Property**

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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |
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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

Businesses that are not mainstream contractors but are brought into the scheme because they spend an average of more than £1m on construction operations each year do not need to apply the scheme to expenditure that relates to property used for the purposes of the business itself, or, if the business is a company: 
- other companies within the same group -  any company of which 50% or more of the shares are owned by the company. 


The types of properties covered by this exemption include: 
- offices -  warehouses -  nursing homes - leased property used by the business's group, including 
property leased by one company to another within the 
same group 


-  any other facilities used for the business. 

2.14  
Any incidental use of the property by third parties such as 
auditors, project team members who are not employees and security staff, will not affect the exemption. 
2.15  
The scheme must be applied to expenditure for construction work 
on any of the following types of property: 
- property that is not used for the purposes of the business, 
such as where it is let for commercial purposes to a 
third party 
- property that is for sale or to let (except where the sale or 
letting of that property is purely incidental to the business) 


  

    

  

  

  

  

- property that is held as an investment. 

  
 
 
2.16  
Work carried out on land owned by a **subcontractor** 
receiving **payment** 
In the following cases, we can authorise mainstream contractors not to apply the scheme to small contracts or payments for construction operations amounting to less than £1,000 (excluding the cost of materials): 
-  where the contractor is paying a subcontractor to undertake work that falls within the scheme on the subcontractor's own property, or 

-  where the contractor is paying a subcontractor to undertake 
work on any agricultural property of which the subcontractor is 
a tenant. 

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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |
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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |
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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

2.17  
An example of this type of payment is where a utility company 
lays a pipeline across some land and pays the land owner or 
tenant to fill in the hole after the pipeline has been laid. 


2.18  
To request authorisation not to apply the scheme to such 
payments, please phone us on 0845 366 **7899.** 

|     |     |     |     |     |
|-----|-----|-----|-----|-----|
|     |     |     |     |     |
|     |     |     |     |     |
|     |     |     |     |     |
|     |     |     |     |     |

We will need the following details: 
- the construction work to be done 
-  who will be doing the work -  where the work will be done 
- the cost of the work. 
2.19 

## Small **Payments**


We can authorise deemed contractors not to apply the scheme to small contracts for construction operations amounting to less than £1,000, excluding the cost of materials. (This arrangement does not apply to mainstream contractors.) 

2.20 

  

  

Contractors who were granted authorisation not to apply the scheme to small payments of this nature prior to 6 April 2007 do not have to reapply if their circumstances remain the same under the current scheme. 



To request authorisation not to apply the scheme to small payments, please phone us on 0845 366 **7899.** 

2.21 

Local education authority maintained **schools** 
The scheme should not be operated for payments made for construction operations by the governing body or head teacher of a maintained school on behalf of the local education authority. 

2.22 

Charities The scheme should not be operated for payments made for construction operations by any body of persons or trust established for charitable purposes only. However, trading subsidiaries of such charitable bodies or trusts will need to apply the scheme to such payments where appropriate. Generally, that will mean where the trading subsidiaries are brought into the scheme because they spend at least £1m on average on construction operations each year as described at paragraph 2.6 onwards. 

2.23 
Subcontractors 

  

  

  
 
   
 

Under the scheme, the term 'subcontractor' has a special meaning that is much wider than it normally has in the construction industry. 

2.24 
 
     

  

  

A subcontractor is a person or body that has agreed to carry out construction operations for a contractor. The subcontractor may be carrying out the operations in any way, including: 
- carrying out the operations themselves 
- having the operations done by their own employees or subcontractors. 

2.25 
Subcontractors include: 
-  companies, corporate bodies or public bodies, as well as any 
self­employed individual running a business or partnership 
- labour agencies or staff bureaux that contract to get work 
done with their own workforce, or to supply workers to 
a contractor 
- foreign businesses being paid for construction operations that 
take place in the UK or its territorial waters (up to the 
12­mile limit) 
- gang­leaders who agree with a contractor on the work to be 
done and receive payment for the work of their gang 


  

  

  

- local authorities and public bodies who carry out construction 
operations for someone else (see paragraphs 2.26 to 2.28). 
2.26 


Local authorities and public bodies as **subcontractors** 

  


Local authorities (and their Direct Services or Labour 
Organisations) and public bodies (or subsidiaries) are subcontractors if they carry out construction operations for 
someone else. 
2.27 


Although they do not need to apply for registration, they must be 
regarded as registered for gross payment. 
2.28 


When making payments to local authorities and public bodies, 
contractors should **not:** 
-  verify them -  apply deductions to any payments - include the payments on their monthly returns. 

## More *Information*



For the full list of local authorities and public bodies that are subcontractors when carrying out construction operations, please see our internal CIS Manual. Go to www.hmrc.gov.uk/manuals/cisrmanual/cisr13040.htm 

## 2.29 Agencies As **Subcontractors**

                                                                                                           
Where a worker is supplied to a contractor by or through an agency and the worker carries out construction operations under the terms of a contract they have with the agency, the agency supplying the worker will be a subcontractor as far as the contractor is concerned. The contractor must always apply the scheme when making payment to the agency. 

2.30 
   
   

  

  
   
   
 

Where a worker is merely introduced to the contractor by an agency and subsequently carries out construction operations under the terms of a contract they have with the contractor, the agency is not a subcontractor in this case. 

2.31 

  

  

  
 

Rules for agency **workers** 
Special rules apply to agency workers who normally treat the worker as an employee for tax and National Insurance contribution (NICs) purposes. The business paying the worker should normally deduct tax under PAYE and account for Class 1 NICs. Very exceptionally, the special rules for agency workers do not apply and any payments for construction work will fall within the scheme. The agency will then be a contractor and will need to fulfil its obligations in that role. 

## Gangs

2.32 

The contractor must meet their obligations under the scheme for payment to the gang­leader. The contractor does not need to be concerned with the transactions between the gang­leader and the other members of the gang. Any deductions from payments to the members of the gang are the responsibility of the gang­leader. 

2.33 

  

  

  

  

  
 

If the contractor makes a separate agreement with any other member of the gang, then that member will be a subcontractor or employee of the contractor. A contractor who pays each member of the gang separately must treat each as a separate subcontractor or employee and apply the deduction scheme or PAYE in each case. 

|                | More   |
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Deductions 
2.36 
A deduction is the amount that a contractor has to withhold on 
account of tax and Class 4 NICs from a payment made to a 
subcontractor. There are two rates of deduction: 
-  standard rate - which must be applied to payments made to 
those subcontractors that are registered with us to be paid 
under deduction 

 
   

  

  
 
   

  

  

- higher rate - which must be applied to payments made 
to subcontractors where we are unable to identify 
the subcontractor. 


2.37  
The deduction rates may change from time to time and we will 
publicise any changes. You can find out the current rates by 
contacting us. 

|                     |     |
|---------------------|-----|
| Phone:              |     |
|                     |     |
| 0845                |     |
|                     |     |
| 366                 |     |
|                     |     |
| 7899                |     |
|                     |     |
| Internet:           |     |
|                     |     |
| www.hmrc.gov.uk/cis |     |
|                     |     |
|                     |     |
|                     |     |

2.38  
The deduction **does** apply to any part of a payment that is for 
subsistence or travelling expenses. 

|     |     |
|-----|-----|
|     |     |
|     |     |
|     |     |
|     |     |
|     |     |
|     |     |
|     |     |

2.39  
The deduction does not apply to any part of a payment that is for 
the cost of the following: 
-  materials - Value Added Tax (VAT) -  any amount equal to the CITB­ConstructionSkills levy 
that the subcontractor has agreed may be deducted from 
their payment. 

Contracts 

  

  

2.40  
A contract means any legally binding agreement or arrangement 
under which one individual or business does work or provides 
services for another individual or business. A contract includes 
an agreement made by word of mouth as well as a 
written document. 

Construction operations 

  
   

  

2.41  
Construction operations are defined in law in Section 74, 
Finance Act 2004, which is shown at Appendix B. 

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|       |     |     |     |     |     |
|       |     |     |     |     |     |
|       |     |     |     |     |     |

2.42  
As a general guide, construction operations cover almost any 
work that is done to: 
-  a permanent or temporary building or structure 
-  a civil engineering work or installation. 

The work might include: - site preparation - alterations - dismantling 
- construction - repairs - decorating - demolition. 

2.43 
 
   

  
 
   

  
   

  
 

Any work in connection with construction done on a construction site in the UK or within its territorial waters (up to the 12­mile limit) and under contract to the owner, client, main contractor or a subcontractor is likely to be a construction operation. 

2.44 

  

  

  

Activities that are not construction **operations** 
Some activities on construction sites are not regarded as construction operations under the scheme. This includes any activity that is clearly not construction work, such as: 
- the running of a canteen 
- the running of a hostel 
- provision of medical or safety services 
- provision of security services 
- provision of site facilities. 

 
More *information* 


  

  

  

Paragraphs 2.41 to 2.44 give only a general guide to construction operations. Appendix A gives more detailed guidance and Appendix B shows the definition of construction operations from Section 74, Finance Act 2004. 

2.45 

  

  

  

  

  
 

Contracts that relate to construction and **non­construction** 
operations Where a single contract relates to a mixture of construction and non­construction operations, all payments due under the contract are within the scheme. This is the case even if only one of the jobs is regarded as a construction operation. 

 
More *information* 

  

  


If you are in any doubt whether a contract should be handled under the scheme, please phone the CIS Helpline on 
0845 366 **7899.** 

## 3 How Payments Are Made To Subcontractors



3.1  
This chapter explains what must happen before payments can be 
made to subcontractors and how payments are made. 
 
The **verification** 
process 
   

3.2  
Verification is the process we use to make sure that 
subcontractors have the correct rate of deduction applied to their 
payments under the scheme. 

  

  
There are three main steps to the process. 1 The contractor contacts us with details of the subcontractor.  
2 We check that the subcontractor is registered with us.  
3 We tell the contractor what rate of deduction to apply, if any.  
   

  


Before a contractor can make a payment for construction work to  
a subcontractor, they must decide whether they need to **verify**  
the subcontractor.  

## When Does A Contractor Need To Verify A **Subcontractor?**

 
   
   

  

  

  
 

3.3  
The rule is that a contractor does not have to verify a 
subcontractor if they last included that subcontractor on a return 
in the current or two previous tax years. See the following 
paragraph for details of how this works in practice. 


  
   

  

3.4  
If you are paying a subcontractor in the tax year that runs from 
6 April 2013 to 5 April 2014, you do not have to verify **them** if 
you have already included them on any monthly return since 
6 April 2011. Otherwise, you must verify the subcontractor. 

3.5 


Example 1 Date contractor engages subcontractor A: 
September 2013 


Date contractor last paid subcontractor A: 
Never 


Details of last payment return: 
None 


Verification **details** The contractor **must** verify this subcontractor before they can 
pay them under the scheme. We will tell the contractor whether a 
deduction should be made from this and all future payments to 
the subcontractor. 
3.6 


Example 2 Date contractor re­engages subcontractor B: 
December 2013 


Date contractor last paid subcontractor B: 
August 2011 


Details of last payment return: 
Contractor made last payment return for the subcontractor in 
August 2011. This was within the previous two tax years. 

  


When this subcontractor was last paid in August 2011 they were 
entitled to be paid gross. 


Verification **details** The contractor does not have to verify this subcontractor and 
should pay them gross, without any deduction. 


3.7 
Example 3 Date contractor re­engages subcontractor C: 
December 2013 


Date contractor last paid subcontractor C: 
August 2009 


Details of last payment return: 
Contractor made last payment return for the subcontractor under 
the previous scheme, on their CIS36 annual return for 2006—07. 
This was earlier than the previous two tax years. 

  
   


Verification **details** The contractor **must** verify this subcontractor before they can 
pay them as they have not included them on a return in the current or previous two tax years. 

## Example Now **Obsolete** 3.8


  

  

  

  


3.9 
Paying the subcontractor gross or under **deduction** 
If a contractor does not have to verify a subcontractor, for the reasons given in paragraphs 3.3 and 3.4, they must pay the subcontractor on the same basis as the last payment made to them - unless we have previously told the contractor otherwise. 

This means that: - if the subcontractor was last paid under the standard rate of 
deduction, the current payment must also be made under the 
standard rate of deduction 

  


- if the last payment was made gross, because a deduction was 
not required, the current payment must also be made gross. 
3.10 
Companies within a **group** 
A contractor that is a company within a group does not have to 
verify a subcontractor if: 
- that subcontractor has already been verified, within the current 
or previous two tax years, by one of the other companies within 
the same group, or 
 
   

    
 
   

  


- paragraphs 3.3 or 3.4 apply. 

## 3.11 How To Verify A **Subcontractor**

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|---------------------|
| Phone:              |
|                     |
| 0845                |
|                     |
| 366                 |
|                     |
| 7899                |
|                     |
| Internet:           |
|                     |
| www.hmrc.gov.uk/cis |
|                     |



Electronically:  Using either Electronic Data Interchange (EDI) or other third party software. 

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|    |    |    |    |    |     |     |     |     |

3.12 
The information we will **need** 
First of all, the contractor should have their own identifying details to hand, such as name, address, phone number and so on. 

We will ask for this information so that we can be satisfied that the contractor is who they say they are. Then, for the verification itself, please have the following information ready. 


 


About the *contractor* - name - Unique Taxpayer Reference (UTR) 
- accounts office reference - employer reference. 
 
 
About the *subcontractor* 

## 

Type of **subcontractor** 
Information we **need** 

  
Sole­trader 
- name 
  
 
 
- Unique Taxpayer Reference 
(UTR) 
  
 
 
- National Insurance number 
  
 
     
Partner in a firm 
- firm's name 
  
 
- partner's name 
  


- firm's Unique Taxpayer 
Reference (UTR) 

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|              |     |       |

  
 
- company registration 
number 
 
 
About the *contract* 
 
   

  

  
Confirmation that a contract has been agreed with the subcontractor or that you have formally accepted a tender for work under a contract. 

3.13  
What we will do when we verify the **subcontractor** 
We will check our records to see if the subcontractor is registered with us and then tell the contractor to pay the subcontractor in one of the following ways: - gross - that is without any deductions taken from the payment 
- net of a deduction at the standard rate 
- net of a deduction at the higher rate because 

|    |     |     |     |     |     |     |     |     |
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|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |

- we have no record of that subcontractor's registration, or - we are unable to verify the details for any other reason. 

|    |    |    |    |    |    |    |     |     |
|----|----|----|----|----|----|----|-----|-----|
|    |    |    |    |    |    |    |     |     |
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|    |    |    |    |    |    |    |     |     |
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|    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |     |     |

3.14 
Verification reference **number** 
When we verify a subcontractor, we will give the contractor a verification reference *number.* The verification reference number will be the same for each subcontractor that we have verified at the same time. If it is not possible to verify a subcontractor, we will add one or two letters to the end of the number so that it is unique to that subcontractor. 



Example 1 A contractor phones us to verify five subcontractors. We verify all 
five subcontractors and give the contractor the single verification 
reference V0004528765 to cover all of them. 

  

Example 2 A contractor phones us to verify five subcontractors. We verify four successfully, but we are not able to verify the fifth. We give the contractor the single verification reference V0004528765 for the four subcontractors who we could verify. We give the same verification number to the subcontractor who could not be verified but add a letter to the end so the number is V0004528765/A. 

3.15 

  
   

  

    

The verification reference number is **very** important if the contractor has been told to make deductions from the subcontractor's payments at the higher rate. Contractors must make a note of the reference numbers given and must enter them on their monthly return alongside the entries for each subcontractor from whom deductions at the higher rate have been made. It is also essential that the contractor shows the verification reference number, complete with any letters on the 


end, on the subcontractor's payment and deduction statement in each case where deductions have been made at the higher rate 
(see paragraphs 3.25 to 3.27). 



The subcontractor will need this reference number later when seeking credit for any of the deductions made. 



Contractors do not need to show this reference on monthly returns or subcontractors' payment statements where deductions have been made at the standard rate or where the subcontractor has been paid gross. 

3.16 
Future verification 
   

  

  

  

When a contractor has verified a subcontractor, or made a payment to the subcontractor if verification was not necessary, the contractor should continue to pay the subcontractor in the same way until we tell them about any change. 

   
   


If a subcontractor is to change from gross payment to payment under deduction, or the other way round, we will tell the subcontractor and the contractor. 

 
3.17 
 
Changing a 
subcontractor's payment **status** 

  

  

When we need to change a subcontractor's payment status from gross payment to payment under deduction, we will write to tell them, giving 90 days' notice of any change to allow them to appeal, if required. 

3.18 

  

  

  

        

We will also contact all contractors who have verified or used the subcontractor in the current or previous two tax years. We will give contractors 35 days' notice of the change. Payments they make to the subcontractor after the notified date of change must be made under deduction. If the subcontractor's recent invoice has already been processed in the contractor's accounting system we would not expect the contractor to reprocess it if it is difficult or time­consuming to do so, but would expect the change to be applied to the next payment. 

3.19 
   

  

  

  

Sometimes a subcontractor's payment status will change from payment under deduction to gross payment. If this happens, we will tell the subcontractor and any contractors who have verified or used the subcontractor in the current or previous two tax years. The revised payment status should then be applied to all subsequent payments to the subcontractor as soon as it is practical for the contractor to do so. 

Making a 
3.20 

Deductions must only be made from that part of the payment that does not represent the cost of materials incurred by the subcontractor. 

## Payment **Under** Deduction

3.21 

  
Any travelling expenses (including fuel costs) and subsistence paid to or on **behalf** of the subcontractor must be **included** in the gross amount of payment and the amount from which the deduction is made. 

How to calculate the amount to **deduct** 
There are two steps that contractors must follow. 
1 Work out the gross amount from which a deduction will be 
made by **excluding:** 
- Value Added Tax (VAT) charged by the subcontractor if the 
subcontractor is registered for VAT, see the examples in 
Appendix D 

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-  any amount equal to the CITB­ConstructionSkills levy 
that the subcontractor has agreed may be deducted from 
their payment. 


  

The contractor will need to keep a record of the gross payment amounts so that they can enter these on their monthly returns. 

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2 Deduct from the gross payment the amount the subcontractor 
actually paid for the following items used in the construction 
operations, including VAT paid if the subcontractor is not 
registered for VAT: 
-  materials (see paragraph 3.23 below) 
-  consumable stores 
- fuel (except fuel for travelling) 
- plant hire (see paragraph 3.24) 
- the cost of manufacture or prefabrication of materials. 

## 3.23 Materials


The contractor can ask the subcontractor for evidence of the direct cost of materials. 


  

  
 
   

If the subcontractor fails to give this information, the contractor must make a fair estimate of the actual cost of materials. The contractor must always check, as far as possible, that the part of the payment for materials supplied is not overstated. If the materials element looks to be excessive, we may ask the contractor to explain why. 

 
More *information* 


Examples of how to calculate the deduction are shown in Appendix D. 



3.24  
Plant hire claimed as **materials** 


'Plant' includes, for example, scaffolding, cranes, cement mixers, concrete pumps, earth moving equipment and compressors. 

|    |    |     |     |     |     |       |     |     |     |
|----|----|-----|-----|-----|-----|-------|-----|-----|-----|
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |

Where the subcontractor hires plant in order to carry out construction work, the cost of the plant hire and any consumable items such as fuel needed for its operation may be treated as materials for the purposes of calculating any deduction. 

|     |     |     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|-----|-----|
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|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |

This treatment only extends to plant and equipment actually hired by the subcontractor from a third party. If the subcontractor owns the plant used in executing the work no notional deduction for plant hire may be made, although consumable items such as fuel used by the plant may still be treated as materials. 

|             |     |
|-------------|-----|
| Providing   |     |
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| documentary |     |
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| evidence    |     |
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| of          |     |
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| a           |     |
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| deduction   |     |
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3.25  
The contractor **must** provide a written statement to every 
subcontractor from whom a deduction has been made within 
14 days of the end of each tax month. A tax month runs from the 
6th of one month to the 5th of the next month so the statement must be provided by the 19th of the month. 


      

The statement may be issued by electronic means but only where: 
- the contractor and subcontractor agree to this method, and 
- the statement is in a form that allows the subcontractor to store and print it. 


  
   
 

The statement can be issued on the basis of one for each tax month or one for each payment if this is more frequent. 

Contractors may choose the style of the statements but they 
must include the following information: 
- the contractor's own name and employer tax reference 
- the end date of the tax month in which the payment was made, 
such as 'tax month ending 5 May 2013' or the date of payment 
where the statement relates to a single payment 


  

  

  

- the following details of the subcontractor 
- name - Unique Taxpayer Reference number (UTR) 
- the personal verification number if the subcontractor could 
not be verified and a deduction at the higher rate has 
been made 
- the gross amount of the payments made to the subcontractor, 
as calculated above in paragraph 3.22 

|    |    |     |     |     |     |
|----|----|-----|-----|-----|-----|
|    |    |     |     |     |     |
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- the cost of any materials that has reduced the amount against 
which the deduction has been applied 


- the amount of the deduction. 


  

There may be other information that a contractor may want to put on the statement to enable the subcontractor to understand the payment that has been made. For example, this may include the amount of Value Added Tax (VAT) charged by the subcontractor. 

|    |       |     |     |       |     |     |       |     |
|----|-------|-----|-----|-------|-----|-----|-------|-----|
|    |       |     |     |       |     |     |       |     |
|    |       |     |     |       |     |     |       |     |

3.26  
It is good practice for a contractor to give a subcontractor a 
payment statement where the payment has been made gross, 
but there is no obligation to do so. 

 

3.27  
Duplicate **statements** 

|    |    |       |     |     |     |       |     |         |
|----|----|-------|-----|-----|-----|-------|-----|---------|
|    |    |       |     |     |     |       |     |         |
|    |    |       |     |     |     |       |     |         |
|    |    |       |     |     |     |       |     |         |
|    |    |       |     |     |     |       |     |         |

If a statement does not reach a subcontractor or it is otherwise lost, the subcontractor may ask the contractor for another copy. 

Contractors may issue duplicates in such cases but the duplicate must be clearly marked 'Duplicate' to avoid any confusion with the missing statement if it is later found. 

 
We have given an example of a typical statement of deduction in 
More *information* 

  


Appendix E. 
 
To **whom** 
3.28 
The contractor should normally make payments under deduction 
should 
to the subcontractor, but the subcontractor may authorise 
payments 
payment to be made out to another person, such as a debt **factor**. 
under 
The statement must still be made out in the name of the 
deduction 
subcontractor and issued to the subcontractor so they receive 

  

  


be **made?** 
credit for any deduction. 
 
See paragraphs 6.9 to 6.12 for more information about making 
More *information* 


gross payments to someone other than the subcontractor. 
3.29  
On or before making any payment to a subcontractor, the 
Keeping 
 
contractor must make a record of: 
records of 
- the gross amount of the payment, excluding VAT 
payments 
- the cost of any materials excluding VAT (if the subcontractor is 
registered for VAT), for those subcontractors who are liable for 
a deduction 

  

  


- the amount of the deduction. 


3.30 
Contractors should: -  consider whether or not they need to verify the subcontractor 
with us (see paragraphs 3.3 and 3.4) 

-  verify the subcontractor if necessary (see paragraphs 3.11 
to 3.16) 

## Summary Of Procedures For Making Payment To A Subcontractor


  

  
   
 

-  make payment to the subcontractor where a deduction is 
not required. 
Where a deduction must be made from the payment, contractors should: 
-  calculate and make the deduction from the payment to 
the subcontractor 
-  record details of payment, materials and deduction 
-  make the net payment to the subcontractor 
-  complete either a statement of deduction for all payments 
made in that tax month or one statement for each payment, as 
the contractor prefers, to show date of tax month, gross 
payment, amount liable to deduction and amount deducted - 
take care to exclude any amounts shown on any earlier statements 

|       |     |     |     |     |     |     |     |
|-------|-----|-----|-----|-----|-----|-----|-----|
|       |     |     |     |     |     |     |     |
|       |     |     |     |     |     |     |     |
|       |     |     |     |     |     |     |     |
|       |     |     |     |     |     |     |     |
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|       |     |     |     |     |     |     |     |
|       |     |     |     |     |     |     |     |
|       |     |     |     |     |     |     |     |

- give the statement to the subcontractor. 

## 4 What We Require From Contractors

4.1 

  

This chapter explains what we require from contractors under the scheme. It covers the contractor's monthly return, payment of any deductions due to us, and explains what might happen if contractors do not apply the scheme properly. 

4.2 
Monthly returns 

Each month, contractors must send us a complete return of all payments made to all subcontractors within the scheme in the preceding tax month. This is regardless of whether the subcontractors were: 
- paid gross - paid net of the standard deduction 
- paid net of the higher deduction. 

4.3 


Monthly returns must reach us within 14 days of the end of the 
tax month they are for. 

  
   

  


Example A return of all payments made to subcontractors between 6 May 
and 5 June must be sent in sufficient time to reach us by 19 June. 
4.4 

  

How to make a monthly **return** 
There are three ways contractors can make their monthly returns. 

www.hmrc.gov.uk/cis 
Internet: Electronically: 


using either Electronic Data 
Interchange (EDI) or other third 
party software 
Post: 


Construction Industry Scheme 
Comben House 
Farriers Way Liverpool L75 1HL 

## 4.5 Paper **Returns**


If contractors choose to use paper returns, we will send out the return forms partially completed to arrive by the last day (the 
5th) of the tax month they are for. 



The names and taxpayer references of all subcontractors that the contractor has previously returned, or newly verified, within the last three months will be preprinted on the forms. Please do not amend any preprinted items on the **returns.** 


  
   

  
 
 
4.6  
Guidance on completing the return is contained in the 
Monthly Return Guidance Notes that we will send out in the 
Contractor Pack. 


4.7  
The returns must be sent to us **unfolded** using the envelope we 
provide. Please ensure that you pay the correct postage for 
the returns. 
4.8  
Completing a monthly **return** 
Contractors must do all of the following. 
- Check the preprinted names and Unique Taxpayer Reference 
(UTR) numbers of all the subcontractors they have paid in 
the month. 
- Leave blank any preprinted entries for subcontractors they 
have not paid in the month. 
- Add the names and Unique Taxpayer References (UTRs) of any 
additional subcontractors to whom they have made payments 
in the month, including the verification numbers against those 
subcontractors from whom a deduction at the higher rate has 
been made. 
- Enter details of the amounts paid to each subcontractor (that is 
before any deduction), details of any materials allowed and 
deductions made from those subcontractors not entitled to 
receive gross payments. 
- Sign (or confirm, if submitting electronically) the declarations 
about verification and the subcontractors' employment status. 

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- If using post, send the original return to us at the address 
shown on page 31 using the preprinted­addressed envelopes we provide. 

  
4.9  
Reporting non­scheme payments to a **subcontractor** 

|    |     |     |     |     |     |     |     |
|----|-----|-----|-----|-----|-----|-----|-----|
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |

Sometimes, contractors may include on the monthly return payments to subcontractors that are not within the scheme. 

Where this happens, we will not normally regard such action as giving rise to an incorrect return. 

|    |    |    |     |     |     |     |     |
|----|----|----|-----|-----|-----|-----|-----|
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |

4.10  
However, when paying subcontractors under deduction, 
contractors should ensure that deductions are not made from 
payments to subcontractors for contracts that are wholly outside 
the scope of the scheme. 
 
4.11  
Nil **returns** 

|    |    |    |    |     |     |     |     |     |     |         |
|----|----|----|----|-----|-----|-----|-----|-----|-----|---------|
|    |    |    |    |     |     |     |     |     |     |         |

Contractors who have not paid any subcontractors in a particular month must submit a 'Nil return'. There are four ways to do this. 

Internet: 
www.hmrc.gov.uk/cis 

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| Phone:          |     |
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| 0845            |     |
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| 366             |     |
|                 |     |
| 7899            |     |
|                 |     |
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| Electronically: |     |
|                 |     |
| using           |     |
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| Electronic      |     |
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| Data            |     |
|                 |     |
| Interchange     |     |
|                 |     |
| (EDI)           |     |
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| or              |     |
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| third           |     |
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| party           |     |
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| software        |     |
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| Monthly         |     |
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| return:         |     |
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| by              |     |
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| completing      |     |
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| the             |     |
|                 |     |
| appropriate     |     |
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| section         |     |
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| on              |     |
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| the             |     |
|                 |     |
| monthly         |     |
|                 |     |
| return          |     |
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| and             |     |
|                 |     |
| posting         |     |
|                 |     |
| this            |     |
|                 |     |
| back            |     |
|                 |     |
| to              |     |
|                 |     |
| us.             |     |
|                 |     |
|                 |     |
|                 |     |
|                 |     |
|                 |     |
|                 |     |

4.12  
Contractors who know they will not be paying any subcontractors 
for several months should let us know and we will suspend the 
issue of the monthly return for six months. If the situation 
changes during that time, the contractor must let us know so that 
we can start sending out the monthly return again. 


  
   

  

4.13  
The principle for the monthly return is that it should reflect what 
the contractor has actually paid and deducted in the month it covers. 

Correcting errors on monthly returns 

  

  

4.14  
We recognise, however, that contractors will sometimes make 
mistakes on their monthly returns. Where this happens we will not automatically look for penalties or take away the contractor's 
own gross status as a subcontractor. We will usually only take 
these actions in the more serious cases where we believe the 
error or omission has been caused by the contractor's negligence 
or intent. 

  


4.15  
The following paragraphs, explaining how and when a return 
needs to be corrected, assume that the relevant monthly return 
has already been submitted to us. 

## 4.16 Incorrect Entry Of Details On **Return**

|    |     |     |     |     |     |       |     |       |
|----|-----|-----|-----|-----|-----|-------|-----|-------|
|    |     |     |     |     |     |       |     |       |
|    |     |     |     |     |     |       |     |       |
|    |     |     |     |     |     |       |     |       |
|    |     |     |     |     |     |       |     |       |

A contractor might omit details of a payment to a subcontractor or might make a mistake in entering details of the payment or deduction onto the return. For example, the contractor may transpose the payment figures and record a payment of £560 as 
£650 on the return. 

4.17 

  

In these cases, the entries on the return will clearly not reflect the actual payments and/or deductions made in the month. To correct these types of error, contractors should phone us giving full details of the errors and the correct figures. 

## More *Information*



If you need to inform us about an incorrect return, please phone the CIS Helpline on 0845 366 **7899.** 

## 4.18 Subcontractor Is Underpaid In **Error**


  

  

There will be cases where the error has been made in the payment itself and copied onto the CIS monthly return, for example, where a subcontractor has been paid £2,000 instead of £3,000. 

4.19 

  

    

Underpayments of this type can usually be put right by a further, balancing payment. That further payment, and any deductions made from it, should be entered onto the return for the month in which it is paid. The total of payments made and any deductions should then be correct, overall. 

4.20 

## Subcontractor Is Overpaid In **Error**

|    |    |     |     |     |     |     |     |     |     |
|----|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

If the contractor overpays the subcontractor, for example, by making a payment of £3,000 instead of the £2,000 due, then the monthly return should reflect the amount of the payment made, that is, £3,000. 

4.21 

 
   

  

  

How that is then corrected for CIS will depend on the approach that the contractor adopts. If the subcontractor's engagement continues into the following month, the contractor may agree with the subcontractor to pay £1,000, instead of the £2,000 due. 

This will balance out the payments and the contractor simply needs to enter the £1,000 paid in the second month on the return for that month. 

4.22 

  

  

  

  

  
 
   

  

If the subcontractor is paid under deduction, the same principle will apply. For the first month in this example, assuming a deduction rate of 20 per cent, there would be a net payment of 
£2,400 and a deduction of £600 and, in the second, a net payment of £800 and a deduction of £200. The payment statements provided to the subcontractor each month would also reflect those figures. 

4.23 

  

  

Where the subcontractor's contract has ended and no further payments are due, from which to take a previous month's overpayment, the steps to be taken by the contractor depend on what action is taken to recover the overpayment. 

4.24 

If the contractor stops the cheque or the subcontractor returns it without cashing it, the contractor should reissue the payment in the correct amount, retrieve and reissue the subcontractor's payment statement and contact us to report the error on the earlier return. The revised payment and any deductions should be recorded on the next monthly return. 

4.25 

  

Where the cheque has been cashed and any deductions have been paid over to us, the contractor will be seeking the excess payment from the subcontractor. Although the monthly return in this case will be correct, as it reflects what was actually paid in the month, the contractor should phone us to report the error and to advise us of the correct payments due to the subcontractor. 

## More *Information*



If you need to inform us about an incorrect return, please phone the CIS Helpline on 0845 366 **7899.** 
4.26 
 
   
 
   
How does a contractor correct a **return?** 

                                                                                                                                     
Contractors who need to report corrections to returns, as described in the previous paragraphs, should phone us with full details of which monthly return(s) they need to correct and, if the correction is appropriate, we will record it. 'Appropriate' here means that the change is a correction of the type described above, rather than, say, for a change in contractor name or address, which is not related to the content of the monthly return. 

4.27 

If possible we will also take this opportunity to deal with any other points that may have prevented the return from being processed fully, such as unreadable fields. 

4.28 

  


We will then generate a new version of the return and 
reprocess it. 
4.29 

  

    

When making corrections over the phone, the contractor should make a note of the date and time of the call and nature of the changes. This is in case the contractor needs to make any subsequent enquiries about the changes. 

## More *Information*


If you need to inform us about an incorrect return, please phone the CIS Helpline on 0845 366 **7899.** Also to find more details about correcting errors on returns, go to www.hmrc.gov.uk/cis 

Making 
4.30 
 
 
payments to us 

  

  

  

  

  

  

Contractors must pay the amount deductible from payments to subcontractors to our accounts office monthly. They must pay deductions due to be made in each tax month within 14 days of the end of that month or within 17 days where payment is made electronically, whether or not these deductions have **actually** 
been **made.** This means that where a required deduction has not actually been made from the subcontractor's payment, for whatever reason, the contractor is still responsible for paying that amount over to us. From May 2010, contractors may have to pay penalties if they do not pay the amounts due on time and in full. 

## Example


  
 
   

  

    

Deductions made between 6 May and 5 June must be paid by 
19 June, or by 22 June where payment is made electronically 
(or the previous banking day where the 22nd is a weekend or bank holiday). 



Please ensure you use the correct payslip for the month in question. 

4.31 


  


If the contractor also has PAYE employees, the contractor must make a payment to our accounts office that includes both the subcontractors' deductions and the PAYE/NICs deducted. 

4.32 
A contractor whose average monthly payments to the accounts 

  

  
   

  
   

  


office (including, where applicable, PAYE and NICs deductions 
from employees) are below a certain limit, may choose to pay 
quarterly. The limit is shown in the Employer Helpbook 
E13, Day­to­day *payroll*. This is included in the Employer Pack, 
but is also available on the internet, go to 
www.hmrc.gov.uk/helpsheets/e13.pdf 

  
   
   
 
   

  


The quarters end on 5 July, 5 October, 5 January and 5 April and payments are due within 14 days of the end of each quarter or 
17 days if the contractor pays electronically. 

|     |     |     |     |     |       |     |
|-----|-----|-----|-----|-----|-------|-----|
|     |     |     |     |     |       |     |

4.33  
Even where payments are made on a quarterly basis, contractors 
must still send returns **monthly** (see paragraph 4.2 above). 

 
Companies 
setting off deductions 

4.34  
Companies that have deductions taken from their income as 
subcontractors should set off these deductions against the 
amounts payable monthly or quarterly for PAYE, NICs and Student 
Loan repayments due from their employees and scheme 
deductions from their subcontractors. 

|     |     |     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|-----|-----|
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |

Companies should simply reduce the amount of PAYE, NICs, Student Loan repayments and any scheme deductions they pay over to our accounts office by the amount of CIS deductions made from their income. 


  

4.35  
In any month or quarter, if the company's own scheme deductions 
are greater than the PAYE, NICs, Student Loan repayments and 
scheme liabilities payable, the company should set off the excess 
against future payments in the same tax **year**. At the end of the 
tax year, when we have received the company's P35 *Employer* 
Annual *Return*, any excess scheme deductions that cannot be set 
off may be refunded or set against Corporation Tax due. 


  

4.36  
Contractors must keep a record of the amounts set off so they 
can complete their end­of­year returns. They can keep their own 
records for this purpose or they can use form CIS132 *Record* of 
amounts *set­off* which can be downloaded from 
www.hmrc.gov.uk/cis 
                                             


4.37  There are no annual returns within the Construction 
Industry Scheme. 


Employer Annual **Return** 
- form P35 

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|----|----|-----|-----|-----|-----|-----|-----|-----|-----|
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|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

Contractors that are required to submit an Employer Annual Return on form P35 should remember to include on that form the total amount of scheme deductions they are due to pay so they can reconcile the total payments made during the year. 


4.38  
From time to time, we will inspect the records of contractors in 
the same way as we inspect an employer's PAYE records. 
Inspection of records 

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|    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |     |     |     |     |     |

4.39  
Records archived using optical imaging **systems** 
If records are created in paper form, we are content for them to be archived using optical imaging systems, as long as what is retained is a complete and unaltered image of the original paper document. 

Contractors must, at their own cost: 
- keep records for at least three years after the end of the tax year to which they relate 

|    |    |    |    |    |    |    |     |     |     |     |     |
|----|----|----|----|----|----|----|-----|-----|-----|-----|-----|
|    |    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |    |    |     |     |     |     |     |

-  make records available on request 
- provide viewing facilities for the records 
- provide full­scale copies of the records if required. 

   

  

  

4.40  
If a contractor fails to operate the scheme properly, we may 
cancel the contractor's own gross payment status if the contractor 
also operates as a subcontractor. 

Action we 
will take if 
contractors do 
not operate 
the scheme 
properly 

|    |    |    |    |    |    |     |     |     |     |
|----|----|----|----|----|----|-----|-----|-----|-----|
|    |    |    |    |    |    |     |     |     |     |
|    |    |    |    |    |    |     |     |     |     |
|    |    |    |    |    |    |     |     |     |     |

4.41  
Penalties for late monthly **returns** 
If a contractor fails to submit a monthly return on time, we will charge them the day after the filing date - a fixed penalty of £100. 


  


If the return is still outstanding, we will charge: 

- two months after the filing date - a second fixed penalty 
of £200 
-  six months after the filing date - a tax­geared penalty which is 
the greater of £300 or 5 per cent of any deductions shown on 
the return 

  

  

  


- twelve months after the filing date - a second tax­geared 
penalty which is the greater of £300 or 5 per cent of any 
deductions shown on the return. Where, however, we believe 
information has been deliberately withheld, this penalty will 
be higher. 

## Penalties For Incomplete Or Incorrect Monthly **Returns**

4.42 
   
 
   

  


If a contractor submits a monthly return that is incomplete or incorrect, we may charge penalties where we believe the error or omission has been caused by negligence or intent on the part of the contractor. 

Incomplete or incorrect returns include: 
- persons or payments omitted from the return 
- persons or payments incorrectly entered onto the return 
- failing to make a declaration in respect of verification or 
employment status 

  
   

  
   


- incorrectly making a declaration in respect of verification or 
employment status. 
4.43 

## Missing **Records**

   

If a contractor fails to produce records relating to payments made under the scheme when asked to do so, we may charge penalties up to £3,000. 

4.44 
We may charge contractors penalties of up to £3,000 if they: 
- fail to give statements to subcontractors registered for payment 
under deduction, recording their payments and deductions, or 

  


-  negligently or deliberately provide incorrect information in 
such statements. 

## Problems With **Deductions**

4.45 
If things go wrong when a contractor applies deductions, the contractor may need to satisfy us that every reasonable care was taken to follow the rules of the scheme and that either: 
- the failure to make all or some of the deduction was due to an innocent error, or 

|    |    |     |     |     |     |       |     |     |     |
|----|----|-----|-----|-----|-----|-------|-----|-----|-----|
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |
|    |    |     |     |     |     |       |     |     |     |

- in spite of reasonable care, the contractor did not believe that 
the payment came within the rules of the scheme. 
4.46 



If we refuse to waive payment of the deductions that should 
have been made, the contractor has the right of appeal against 
that decision. 
 
More *information* 

  
 
   
 
   

  
 
   
 
For more information, see our factsheet 
HMRC1 - HM Revenue & Customs decisions - what to do if you 
disagree which is available from 
www.hmrc.gov.uk/factsheets/hmrc1.pdf 


  

  

4.47  
Where we cannot agree whether or not a deduction should have 
been made, we may make an assessment of the amount we 
believe should have been deducted. The contractor has a right of 
appeal against our assessment. 
4.48  
We will waive the contractor's liability if we are satisfied that the 
individual or business the contractor made the payments to: 
-  was not chargeable to Income Tax or Corporation Tax for these 

  


payments, or 
- has made a return of income or profits that includes the 
 
   

  


payments and has paid the Income Tax and Class 4 National 
Insurance contributions or Corporation Tax for the income 
or profits. 

## 5 Businesses Not Resident In The Uk

Non­resident businesses 
5.1  
The scheme applies to: 
-  any non­resident contractor who pays subcontractors for 
construction work carried out in the UK 

  

  

  
 
-  any non­resident subcontractor who is being paid for 
construction work carried out in the UK. 

  
 
     
 
   
 
   

It does not matter where payment is actually made - if the construction work is carried out in the UK then the scheme applies to that payment. 

|       |     |     |     |     |     |
|-------|-----|-----|-----|-----|-----|
|       |     |     |     |     |     |
|       |     |     |     |     |     |

There is no difference between the treatment of UK 
contractors and subcontractors and non­resident contractors and subcontractors. 


  

  
 
  

5.2  
If you are applying to be registered as a subcontractor you will 
need to do this before you start work in the UK. Otherwise, your 
contractor will have to make deductions at the higher rate from 
your payments. 


  

  
 

5.3  
Non­resident individuals and partnerships who need to 
register as: 
-  contractors should see paragraph 1.16 in this guide 
-  subcontractors should see paragraph 1.19 in this guide. 

 
 
Non­resident individuals and partnerships registering for CIS 
 
 
Non­resident companies registering for CIS 

  

5.4  
Companies taking on subcontractors for construction work in the 
UK and companies that are intending to act as subcontractors in 
the UK need to register with our Charities Assets and Residency 
Office. There are three ways to contact us about this. 
Post: 
HMRC CAR Residency 
Non­Resident Business CIS 
St John's House 
Merton Road Liverpool L75 1BB England 

|      |     |     |
|------|-----|-----|
| Fax: |     |     |
|      |     |     |
| +44  |     |     |
|      |     |     |
| 151  |     |     |
|      |     |     |
| 472  |     |     |
|      |     |     |
| 6148 |     |     |
|      |     |     |
|      |     |     |
|      |     |     |
|      |     |     |

Phone:  
+44 151 472 6208 or +44 151 472 **6209** 
for information about Double Taxation Agreements or about how the Construction 


Industry Scheme applies to non­residents or to discuss registration or other matters about the scheme. We can give you advice and send you the forms and leaflets you need. 

5.5 

  
 

Repayment of 
deductions 
where there is a 
Double Taxation 
Agreement 


    

    

  

  

  
 
   

If you, or your company, are resident in a country that has a Double Taxation Agreement (DTA) with the UK it is possible that you may be entitled to claim exemption from UK tax. This will be the case where your UK business profits are not attributable to a permanent establishment in this country through which you are carrying on business. Claims for exemption under the terms of a DTA should be sent to HMRC CAR Residency. You can find a list of the UK's DTAs in booklet HMRC6 - Residence, Domicile and the Remittance *Basis* available on the internet at www.hmrc.gov.uk/cnr/hmrc6.pdf 

## Permanent **Establishment** 5.6

The term permanent establishment includes: 
- place of management 
-  a branch -  an office 
-  a factory -  a workshop -  an installation or structure for the exploration of 
natural resources 
-  a mine, an oil or gas well, a quarry or any other place of 
extraction of natural resources 

|     |     |     |     |
|-----|-----|-----|-----|
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |
|     |     |     |     |

-  a building site or construction or installation project. 

5.7 

  

    

    

  
 
   

 

  

A building site or construction or installation project is a permanent establishment. However, under many Double Taxation Agreements it is not treated as one if it does not last longer than a stated period - usually between 3 and 24 months. Check the agreement for your country of residence to see what, if any, the period is. 


  

5.8  
The existence of a Double Taxation Agreement does not mean 
that you do not have to operate the Construction Industry 
Scheme. You must still register and operate the scheme 
as normal. 

  


5.9  
If we agree that you are exempt from UK tax under a DTA, we will 
repay any deductions made under the scheme as follows. 

|    |     |     |     |     |     |     |     |
|----|-----|-----|-----|-----|-----|-----|-----|
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |

5.10  
Company subcontractors should set off any deductions made 
from payments they receive from contractors against their own 
liability for PAYE/NICs and subcontractors' deductions, where they have such liabilities. Any balance of deductions that cannot be set 
off in this way may be repaid on submission of the company's 
annual return on form P35. 

|    |    |    |     |     |     |     |     |     |     |
|----|----|----|-----|-----|-----|-----|-----|-----|-----|
|    |    |    |     |     |     |     |     |     |     |
|    |    |    |     |     |     |     |     |     |     |

5.11  
Individuals and partnership subcontractors wanting to claim a 
refund should contact us at the office where they registered for 
the scheme. 



Repayment of 
deductions where **there** is no **Double** 
Taxation Agreement 
   

    

  

  

  

5.12  
Generally, if you are an individual or partner in a firm, any 
deductions made by contractors from the amounts they pay you 
are allowable against your UK tax liability. However, there may be 
times when you make little or no profit in the tax year, and the 
deductions exceed your liability. When this happens, you can 
claim a repayment of the excess deductions from us. If we are 
satisfied that you have paid too much, we will send you 
a repayment. 

|     |     |       |     |     |     |     |
|-----|-----|-------|-----|-----|-----|-----|
|     |     |       |     |     |     |     |

5.13  
Companies must claim a repayment of excess deductions on 
submission of their annual return on form P35. 

|    |    |    |    |    |     |     |     |     |     |
|----|----|----|----|----|-----|-----|-----|-----|-----|
|    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |     |     |     |     |     |
|    |    |    |    |    |     |     |     |     |     |

5.14  
Non­resident subcontractors who do not **register** 
If you do not register as a subcontractor when you should do, 
your contractor is obliged to make deductions at a higher rate 
from any payments made to you. 

## 6 Miscellaneous

False declarations 
   

  

  

6.1  
It is an offence for a subcontractor knowingly to: 
- make a false declaration, or - submit any false documentation  
in order to register for gross payment or payment under deduction.  


    


This offence may result in a penalty of up to £3,000. 
 
Disputes **about** 
deductions 
   
 
   

  
   

  

6.2  
If a contractor and a subcontractor cannot agree about a 
deduction, either of them may ask us for a ruling. If they still 
cannot reach an agreement after the ruling, either the contractor 
or the subcontractor may ask us to bring the matter before the independent tax tribunal for a decision. 


      

6.3  
If agreement cannot be reached quickly because of the dispute, 
the contractor must make the appropriate deduction and pay it 
over to our accounts office. If it is later found that some or all of 
the deduction was not necessary, we will repay the excess to 
the subcontractor. 

|     |     |     |       |     |     |     |
|-----|-----|-----|-------|-----|-----|-----|

6.4  
The same rules apply in any disagreement with us. 

|         |     |
|---------|-----|
| Use     |     |
|         |     |
| of      |     |
|         |     |
| trading |     |
|         |     |
| names   |     |
|         |     |
|         |     |
|         |     |
|         |     |
|         |     |
|         |     |

6.5  
Many businesses, whether sole traders, partnerships or 
companies, conduct all, or part, of their business using one, or 
sometimes more, trading names. However, a trading name has no 
legal status of its own and is simply a brand name for the 
underlying legal entity. 


6.6  
When registering for CIS, subcontractors will need to provide us 
with their legal name but they can also give us one trading name, 
if they wish. 

|    |    |    |     |     |     |     |     |       |     |
|----|----|----|-----|-----|-----|-----|-----|-------|-----|
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |
|    |    |    |     |     |     |     |     |       |     |

6.7  
When the subcontractor subsequently enters into a contract with 
a contractor, they should give the contractor details of their legal 
name, as registered on our computer system, together with their 
Unique Taxpayer Reference (UTR), and National Insurance 
number, or company registration number when they are a 
company. Without this information, we may be unable to identify 
the subcontractor when the contractor attempts to verify them. 
When this happens, we will tell the contractor to make deductions 
at the higher rate from any payments to the subcontractor. 

|    |     |     |     |     |     |     |       |
|----|-----|-----|-----|-----|-----|-----|-------|
|    |     |     |     |     |     |     |       |

6.8  
Contractors should enter the subcontractor's name, as it is 
recorded on our computer system, onto the monthly return. 

## 6.9 Nominees Payments To Third **Parties**

|     |       |     |     |     |       |     |     |
|-----|-------|-----|-----|-----|-------|-----|-----|
|     |       |     |     |     |       |     |     |
|     |       |     |     |     |       |     |     |
|     |       |     |     |     |       |     |     |
|     |       |     |     |     |       |     |     |
|     |       |     |     |     |       |     |     |

If payment is to be made to a subcontractor's nominee, for example, a gang member, workmate or the subcontractor's relative, the contractor must verify both the subcontractor and the nominee. For payment to be made gross to the nominee, both the subcontractor and the nominee must be registered for gross payment. 

|    |    |     |     |       |     |     |     |     |     |
|----|----|-----|-----|-------|-----|-----|-----|-----|-----|
|    |    |     |     |       |     |     |     |     |     |
|    |    |     |     |       |     |     |     |     |     |

6.10  
If the subcontractor is not registered for gross payment, payment 
under deduction must be made to the nominee using the rate 
applicable to the subcontractor. 

|    |    |     |     |       |     |       |     |     |
|----|----|-----|-----|-------|-----|-------|-----|-----|
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |
|    |    |     |     |       |     |       |     |     |

This means that if the subcontractor is registered for payment under deduction, the standard rate of deduction must be applied to the payment being made to the nominee. If the subcontractor is not registered, or cannot be verified for any other reason, the payment to the nominee must be made under deduction at the higher rate - regardless of the nominee's own payment status. The contractor must still make out a payment and deduction statement in the name of the subcontractor and issue it to the subcontractor. 

## 6.11 Debt **Factors**

   

  

    

If a subcontractor assigns their right to receive payment to a debt factor, then, the contractor can make the payment as if it were being made direct to the subcontractor. 


If we have told the contractor to pay the subcontractor gross, the payment to the debt factor must also be made gross. 


  

If we have told the contractor to make a deduction from the payment to the subcontractor, the contractor must make the deduction from the payment to the debt factor. 


  

  

  
 
 
The contractor must still make out a payment and deduction statement in the name of the subcontractor and issue it to the subcontractor. 

6.12 
   

Where a subcontractor has died, any payments to their personal  
representatives should be made on the same basis as payments  
were made to the deceased immediately before their death.  

Personal representatives, liquidators and 
receivers 
   

  

  

Where a liquidator, receiver or administrator has been appointed  
to conduct the affairs of a company, payments should continue to  
be made in accordance with the company's tax status.  

6.13 
 
 
Death of a 
contractor 
   

  

If a contractor dies, the responsibility for the running of the  
scheme falls to their personal representatives. The  
responsibilities include paying over deductions and sending in  
the monthly returns.  

6.14 


Takeover of 
a **business** 
   

  

  

  

  

If a business previously run by an individual is taken over by a  
partnership or company, the old scheme registration cannot be  
used for the new business. The new business must register for the  
scheme and get gross payment status before it can be paid  
without deductions being made. Similarly, if an individual takes  
over as sole proprietor of a business having previously been a  
partner or director of that business, they must apply again for  
gross payment status as the previous status of the partner or  
director will no longer be valid.  

|    |       |     |     |     |     |     |       |
|----|-------|-----|-----|-----|-----|-----|-------|
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |
|    |       |     |     |     |     |     |       |

When a contractor takes over another business as a going  
concern, the contractor may request authorisation to treat certain  
subcontractor verifications made by the previous business as if  
they had been made by the new business. Normally, this will  
apply in respect of any subcontractors who are working on  
ongoing contracts at the time of the transfer of the business. This  
will avoid the need for the contractor to have to verify several  
subcontractors after the acquisition of the business.  

6.15 

  


To request authorisation in these circumstances, please phone us  
on 0845 366 **7899**.  


We will need the following details for **both** the new contractor  
and the former contractor business:  
- name - Unique Taxpayer Reference (UTR) - accounts office reference - employer reference. 



We will also need to know which subcontractors' contracts are being transferred to the new business. 


  
 
Change of control of a close **company** 

  
   
 
   

    

    

  
   

  
 
   

6.16  
A close company is basically a company that is under the control 
of five or fewer persons. If a close company holds gross payment 
status and there is a change of control - through a transfer or 
issue of shares in the company - the company must notify us of the names and addresses of the new shareholders within 30 days. 
Companies that fail to do this may have their gross payment 
status withdrawn. 

|                | Change   |
|----------------|----------|
|                |          |
| of             |          |
|                |          |
| address        |          |
|                |          |
|                |          |
|                |          |
|                |          |
|                |          |
| 6.17           |          |
|                |          |
| Subcontractors |          |
|                |          |
| must           |          |
|                |          |
| notify         |          |
|                |          |
| us             |          |
|                |          |
| of             |          |
|                |          |
| any            |          |
|                |          |
| change         |          |
|                |          |
| to:            |          |
|                |          |
| -              |          |
|                |          |
| the            |          |
|                |          |
| business       |          |
|                |          |
| address        |          |
|                |          |
| -              |          |
|                |          |
| registered     |          |
|                |          |
| office         |          |
|                |          |
| address        |          |
|                |          |
| -              |          |
|                |          |
| private        |          |
|                |          |
| address.       |          |
|                |          |
|                |          |
|                |          |
|                |          |

6.18  
The terms contra and set­off have special meanings in the 
construction industry. 

Contras and set­offs 
6.19  
Contras 
 
     

A contra is a charge for goods or services supplied by one party to another. 


  

    

6.20  
Under the scheme, a contra does not reduce the payment from 
which the deduction may have to be made and is a payment by 
the contractor to the subcontractor. 

## Example

|                |     |     |       |     |     |     |
|----------------|-----|-----|-------|-----|-----|-----|
|                |     |     |       |     |     |     |
| On             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| a              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contract       |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| worth          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| £200,          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| a              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contractor     |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| gives          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| subcontractor  |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| some           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| surplus        |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| materials      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| and            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| restricts      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| payment        |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| by             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| £50.           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| The            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contractor     |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| must           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| calculate      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| deduction      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| on             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| full           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contract       |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| value          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| of             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| £200.          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| When           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| completing     |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| monthly        |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| return,        |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contractor     |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| must           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| show           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| gross          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| payment        |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| to             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| subcontractor, |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| or             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| amount         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| before         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| deduction      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| where          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| appropriate,   |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| in             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| the            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| amount         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| of             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| £200.          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| 6.21           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| Set­off         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| A              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| set­off         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| is             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| money          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| not            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| paid           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| to             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| a              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| subcontractor  |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| by             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| a              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contractor     |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| who            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| believes       |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| there          |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| has            |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| been           |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| a              |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| breach         |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| of             |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
| contract.      |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |
|                |     |     |       |     |     |     |

6.22  
Under the scheme, a set­off **does** reduce the payment from which 
the deduction may have to be made and so is not a payment by 
the contractor to the subcontractor. 
   

  


Example On a contract worth £2,000, a contractor withholds £400 because work was below standard. 



The contractor must calculate the deduction on £1,600. 


  


When completing the monthly return, the contractor must show the gross payment to the subcontractor, or the amount before deduction where appropriate, in the amount of £1,600. 

6.23 


Paying subcontractors by **credit** or 
payment **cards** 

  

  
   

Subcontractors may invite contractors to pay them by debit, credit or other type of purchase card in order to effect payment under the contract. Usually, there will then be a difference in the timing between the subcontractor receiving payment from the card company and the contractor receiving and paying against a statement on which that particular charge appears. 

6.24 

  

  

The contractor's arrangements for paying and accounting for these charges will affect the timing of when such payments must be entered onto the monthly return. If the contractor's accounting system will not treat the subcontractor's invoice as having been paid until payment is made to the card company, then that will be the point at which the payment should be included on the monthly return. 

6.25 
 
   

  

Although there is no particular reason why cards cannot be used to make payments to subcontractors paid under deduction, doing so would lead to a number of problems. These include the timing of the payment of the amount deducted, the recording of the payment and deduction on the relevant monthly return and the issue of the deduction statement to the subcontractor. We therefore recommend that contractors should restrict the use of payment cards to those subcontractors paid without deduction or to cover only the cost of materials. 

6.26 
Retention payments 

  

  

  

  
   

Some contracts allow the contractor to retain a percentage of the contract price for a period after the construction work has been completed. This is done so that if deficiencies in the work become apparent during the 'retention period', the final payment can be withheld until the subcontractor has made good the faults. 

6.27 

  

There are no special rules for retention payments and they are treated the same way as any other payments. Whether the retention payment is made gross or under deduction depends on the subcontractor's tax status at the date of payment and not when the work was actually done. 

6.28 

At the time of payment of the retention, the contractor must decide whether they must verify the subcontractor (in accordance with paragraphs 3.2 to 3.16) and then make the deduction required under the scheme. 

Reverse 
6.29 
premiums 
 
   

  

  

Reverse premium is the term commonly used to describe when a landlord or developer offers inducements to prospective tenants to take up an interest in land. 

An example of an inducement is payment of all or part of the costs of fitting out the property. Such inducements are excluded from the scheme. 

 
   
 
Payments made **6.30** 
under a **Private** 
Finance **Initiative** 
arrangement 

The Private Finance Initiative (PFI) is a form of Public Private Partnership, aimed at enabling the public and private sectors to work more closely together by making use of private capital and expertise in the provision of public sector infrastructure and services. PFI contracts are often for long periods, typically 
20 to 30 years. Common types of PFI include: 
-  services sold to the public sector - the private sector provides the capital assets and the public purchaser pays only on delivery of the specified services 

- financially free­standing projects - the private sector designs, 
builds, finances and operates an asset, recovering the costs 
through direct charges on the private users of the asset 

    

  

  

  

  

  


- joint ventures - the costs of a project are not met entirely by 
the charges on end users but are subsidised from public funds. 
6.31 

  

  


Payments made by a public body under a PFI arrangement are 
specifically excluded from the Construction Industry Scheme and 
the scheme must not be applied to such payments. 
 
 
More *information* 

  

  

  

If you have any doubt about whether an arrangement is outside the scope of the scheme because it should qualify as a PFI 
arrangement you should phone us on 0845 366 **7899**. 

Group companies 

  

  
   
   
 
   

  

6.32 
The definition of group companies for the purposes of certain 
aspects of the scheme, is contained at Section 413(3)(a), Income 
and Corporation Taxes Act (ICTA) 1988. Basically, two companies 
are deemed to be members of a group if one is at least a 
75 per cent subsidiary of the other, or both companies are at 
least 75 per cent subsidiaries of a third company and so on. 

Managing agents 
   
 
   
 
   

  

  

  
 
   

6.33 
When a managing agent is acting for a principal or client in 
letting contracts that include construction operations, the 
managing agent will not generally be a contractor as defined 
within the scheme. This is because the contract for construction 
operations will more likely be between the principal and the 
subcontractor. The managing agent's role would be to see that 
the work is carried out in accordance with the principal's contract 
with the subcontractor and may include making payments to 
the subcontractor. 

|    |     |     |     |     |     |     |     |     |
|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |

6.34 
Where the contract between the principal and the managing 
agent includes the maintenance of the property and the agent 
enters into a contract on their own behalf, even though this is 
done under the terms of the service contract between the agent 
and the principal, the agent will be acting as a contractor within 
the scheme. 

|    |    |    |     |     |       |     |     |     |     |
|----|----|----|-----|-----|-------|-----|-----|-----|-----|
|    |    |    |     |     |       |     |     |     |     |
|    |    |    |     |     |       |     |     |     |     |
|    |    |    |     |     |       |     |     |     |     |

6.35 
Payments made under a contract between the managing agent 
and the subcontractor may also fall within the scheme where it is 
a mixed contract, for example, where it includes elements of 
security, cleaning, minor repairs and maintenance. 

Scheme representatives 

    
 
   

  

  

6.36 
A contractor that is a company within a group may be authorised 
to appoint another of the companies within the same group to 
undertake its obligations under the scheme. For example, a group 
of several companies required to operate the scheme could 
choose a single company within the group to operate CIS on 
their behalf. 

|    |    |    |     |     |     |     |     |     |     |     |
|----|----|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |    |    |     |     |     |     |     |     |     |     |
|    |    |    |     |     |     |     |     |     |     |     |

6.37 
The scheme representative must continue to make returns and 
payments to us under the name of the company or companies for 
which it is acting. 

6.38 

  

Each company that has chosen to have its scheme obligations handled by another company within its group will always remain liable for any obligations it has under the scheme even though it has chosen another company to operate the scheme on its behalf. 

6.39 

  


To request authorisation in these circumstances, please phone us 
on 0845 366 **7899**. 
6.40 
 
Unofficial **forms** 

    

No substitute forms may be used. If a form has been lost or mislaid, please ask us for another. 


  

However, contractors will need to create their own statements of tax deduction for those subcontractors from whom deductions have been made. Paragraphs 3.25 to 3.27 and Appendix E give more information on this. 


  

A.1  
This Appendix gives information on the scope of construction 
operations as we have interpreted it from the legislation in 
Section 74, Finance Act 2004. 
The **scope** of construction operations 

  


We have reproduced Section 74, Finance Act 2004 in Appendix B 
for your reference. 

## A.2 What Is A **Contract?**

 
Contracts relating to construction operations 

A contract may be: 
- written, or 
- agreed by word of mouth. 

  
 
   
 
   


Regardless of the form of the contract, the common characteristic will be that there will be a payment by a contractor to a subcontractor and the contract will relate to construction operations. 

 
   

A.3  
Many contracts in the construction industry are agreed by word 
of mouth. This will not normally stop them from being legally 
binding on both parties and means they will come within 
the scheme. 

  
 
 
A.4  
Written contracts can vary in size and complexity. 
                                                                   
A.5  
When you have decided that a contractor and a subcontractor are 
parties to a contract and that the contract is not one of 
employment, you need to decide whether it is a contract that 
'relates to construction operations'. 
 
   

  

  

  

A.6  
When does a contract relate to construction **operations?** 
'Relates to' is very broad in its meaning. Any contract that has 
construction operations included in it, however small a part that 
may be, will fall within the scheme. 
 
   

  

  

  
   


A.7  
Mixed **contracts** 
If a contract includes some work that is within the scheme and some that is nothing to do with construction at all then all payments made under that contract will come within the scheme - even if shown on separate **invoices.** These types of contracts are often referred to as mixed contracts. 

|    |     |     |     |     |     |     |     |
|----|-----|-----|-----|-----|-----|-----|-----|
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |

A.8  
Contracts that relate to construction operations **because** 
the work contributes to the overall **delivery** of a construction **project** 
Some contracts will 'relate to construction operations' because they include work that contributes to the overall delivery of a construction project. For example, a tree surgeon may have many contracts in a year for tree felling. Tree felling is not normally a construction operation in itself, but if the trees are cut down as part of work to clear a site ready to build a housing estate or a road, payments for the tree felling **will** be within the scheme. 


    

  

  


This means that it is not possible simply to look at the types of work carried out by a business to decide whether the business is a contractor or subcontractor. Contracts for the work will sometimes be covered by the scheme and sometimes will not. 


A.9  
Contracts that do not specifically provide for 
construction **operations** 
'Construction operations' refers not only to particular works, but 

  

  

  


also to the work that people need to do in order to carry out those operations. This means that a contract **relating** to construction **operations** could include a contract that did not specifically provide for operations, but which did provide for the provision of labour to carry out those operations. 


  

  

  

    

A.10  
An example of this would be where a subcontractor was under a 
duty to provide the labour of scaffolders to a contractor. The work 
of scaffolders is within the scheme when it is preparatory or integral to construction operations taking place. 
Construction 
A.11  
The rest of Appendix A gives guidance on operations that are 

  

  


operations  
regarded as construction operations within the scheme and 
operations that are regarded as non­construction operations. 
Please read these paragraphs in conjunction with the table in 
Appendix C. 

|    |    |    |    |    |    |    |     |     |
|----|----|----|----|----|----|----|-----|-----|
|    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |     |     |

More *information*  
It is not possible for us to give exhaustive information in this 
guidance booklet. If you are unsure whether any work is within 
the scope of the scheme, please contact us for advice. 

|                     |     |
|---------------------|-----|
| Phone:              |     |
|                     |     |
| 0845                |     |
|                     |     |
| 366                 |     |
|                     |     |
| 7899                |     |
|                     |     |
| Internet:           |     |
|                     |     |
| www.hmrc.gov.uk/cis |     |
|                     |     |
| Construction        |     |
|                     |     |
| Description         |     |
|                     |     |
| Legislation         |     |
|                     |     |
| Paragraph           |     |
|                     |     |
|                     |     |
| operations          |     |
|                     |     |
| (See                |     |
|                     |     |
| Appendix            |     |
|                     |     |
| B)                  |     |
|                     |     |
|                     |     |
| included            |     |
|                     |     |
| within              |     |
|                     |     |
| Buildings           |     |
|                     |     |
| and                 |     |
|                     |     |
| structures          |     |
|                     |     |
| S74                 |     |
|                     |     |
| (2)(a)              |     |
|                     |     |
| A.12                |     |
|                     |     |
|                     |     |
|                     |     |
| the                 |     |
|                     |     |
| scheme              |     |
|                     |     |
| Construction        |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.13                |     |
|                     |     |
| Alteration          |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.14                |     |
|                     |     |
| Repair              |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.15                |     |
|                     |     |
| Extension           |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.16                |     |
|                     |     |
| Demolition          |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.17                |     |
|                     |     |
|                     |     |
| Dismantling         |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.18                |     |
|                     |     |
| and                 |     |
|                     |     |
| 19                  |     |
|                     |     |
|                     |     |
| Works               |     |
|                     |     |
| forming             |     |
|                     |     |
| part                |     |
|                     |     |
| of                  |     |
|                     |     |
| the                 |     |
|                     |     |
| land                |     |
|                     |     |
| "                   |     |
|                     |     |
| (2)(b)              |     |
|                     |     |
| A.20                |     |
|                     |     |
| to                  |     |
|                     |     |
| 22                  |     |
|                     |     |
|                     |     |
| Installation        |     |
|                     |     |
| of                  |     |
|                     |     |
| systems             |     |
|                     |     |
| "                   |     |
|                     |     |
| (2)(c)              |     |
|                     |     |
| A.23                |     |
|                     |     |
|                     |     |
| Internal            |     |
|                     |     |
| and                 |     |
|                     |     |
| external            |     |
|                     |     |
| cleaning            |     |
|                     |     |
| "                   |     |
|                     |     |
| (2)(d)              |     |
|                     |     |
| A.24                |     |
|                     |     |
| and                 |     |
|                     |     |
| 25                  |     |
|                     |     |
|                     |     |
| Painting            |     |
|                     |     |
| and                 |     |
|                     |     |
| decorating          |     |
|                     |     |
| "                   |     |
|                     |     |
| (2)(e)              |     |
|                     |     |
| A.26                |     |
|                     |     |
|                     |     |
| Integral            |     |
|                     |     |
| works               |     |
|                     |     |
| "                   |     |
|                     |     |
| (2)(f)              |     |
|                     |     |
| A.27                |     |
|                     |     |
|                     |     |
| Preparatory         |     |
|                     |     |
| works               |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.28                |     |
|                     |     |
|                     |     |
| Finishing           |     |
|                     |     |
| operations          |     |
|                     |     |
| "                   |     |
|                     |     |
| "                   |     |
|                     |     |
| A.29                |     |
|                     |     |

## A.12 Buildings And **Structures**


Most construction operations are carried out as work on buildings and structures. The operations can be: 
- permanent - temporary - offshore. 


The six main areas of work are: 
- construction - alteration - repair - extension 
- demolition - dismantling. 

  
 
   
 
Each of these is explained below in more detail. 

## A.13



Construction Construction is a broad term that covers all of the following: 
- to build - to make - to put together 
- to assemble. 



Construction **does** include the assembly of prefabricated units and site facilities. 

|    |    |     |     |     |     |     |     |     |     |
|----|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

Example The onshore construction of wind turbine towers and modular elements of wind turbine towers that are later towed to their final location at sea is an example of how broad we regard the definition of construction. 

 
   
   

  
 
A.14 
Alteration An alteration is where a building or structure has been made different in any way. 



Alterations can be major or can be as simple as an adjustment or modification. 

  

  

Examples - An alteration to the fabric of a building to accommodate 
equipment such as an item of plant or machinery, lifts, hoists or 
heavy­duty conveyors. 
  

  


- An alteration to accommodate a building service system (see 
paragraph A.23 Installation of systems). 
  
 
 
- Removal of asbestos. 
  

    
 
- Installation of partitioning or shop fittings to allow the building 
to be used in a different way. 
 
 
More *information* 


Our Notice 708 VAT: Buildings and *construction* explains the meaning of alterations for VAT purposes. 

## A.15

|     |     |     |     |     |
|-----|-----|-----|-----|-----|
|     |     |     |     |     |

Repair Repair includes 'making good' and replacement of defective or damaged parts of a building or structure. 


  

  

  

  

  

Repairs also include repair of a building or structure that is necessary following a repair to any systems in the building or structure, even though a repair to the system itself is not a construction operation for the purposes of the scheme (see paragraph A.23 Installation of systems). 

A.16 

Extension Extension means adding to or enlarging an existing building or structure. 

A.17 

  

Demolition Demolition means pulling down a building or structure. 

A.18 

  

Dismantling Dismantling means taking a building or structure apart. This is usually where the materials are expected to be used again. 

A.19 

  

  

  

  

  

Sometimes part of a building may be destroyed or dismantled prior to a refurbishment or to its use being changed. Often this type of work will be an alteration to the building or structure as well and the legislation is broad enough to include any work that involves any of the following: 
- taking a building or structure apart 
- totally destroying a building or structure 

   

  
 
 
- rebuilding a building or structure 
- altering a building or structure. 


The resulting building or structure may be permanent or temporary. 

A.20 

## Works Forming Part Of The **Land**


All types of construction work that do not involve buildings or structures are called works forming, or to form, part of the *land.* 

  

  


Examples - Minor works, such as a wooden fence with concrete posts. 
  


- Major works such as roads, railways, bridges, harbours and 
power lines. 
  

  


- Industrial plant such as petrochemical plant, a silo, tank or 
water treatment plant. 
A.21 
 
   
     

  
 

Plant that is located in a building will not form part of the land and so will not fall within the scheme under this section. However, in some circumstances the installation of plant may require that the building be altered to accommodate or remove the plant so this will still be a construction operation. 

A.22 

Alteration, repair, extension, and demolition of works forming 
part of the land are also construction operations. 

A.23 

  
 
   

  

  

  

  

  

  

Installation of **systems** 
A system is something that is made up of connected parts to perform a particular function such as systems of heating or lighting. The scheme includes the installation of 'systems'. As such, it includes the installation of complete systems rather than parts of a system. Complete systems will be installed in new builds or existing buildings and structures undergoing reapply­development. Repairs to a system, such as new taps on a sink or an extension to a system such as adding an extra radiator are not installations of systems and are therefore not included within the scheme. 


  
 
   
 
     

  
A.24  
Internal and external **cleaning** 
Internal cleaning is regarded as a construction operation if it is undertaken whilst the construction contract is ongoing. 

|     |     |     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|-----|-----|
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |     |

A.25  
External cleaning or routine cleaning of existing commercial or 
industrial premises that are not undergoing any types of 
construction operations is not regarded as a construction 
operation unless it is preparatory to painting and decorating. 

  
 
   
 
A.26  
Painting and **decorating** 
Painting and decorating is regarded as a construction operation. 


A.27  
Integral **works** Integral works are works that must be carried out for a construction operation to be completed. 

## Example


  
   

      
 
   

Erection of scaffolding might not be considered to be the construction of a structure in its own right, but it is a construction operation because it would not be possible to carry out other works that are construction operations without it. 


A.28 
Preparatory **works** Preparatory works are works that must be carried out before a construction operation can be started. 

## Example

   

    


Clearing a site or draining land in a flood plain before building houses. 


  
 
 
A.29 
Finishing **operations** 
Finishing operations are work that 'renders complete' or 
'finishes off' any of the construction operations in the previous paragraphs. 

## Example


  

  


In most modern commercial buildings much of the internal fixtures and fittings will be included in the design specifications and a building will not be considered complete without them. 

A.30 

  

  
 
     

Finishing operations are not regarded as construction operations in their own right. They must be considered as part of the overall work that is being carried out as well as part of the contract as a whole. Often, the same work will not be a construction operation when it is carried out as an independent activity. 

  

  


Examples - Tree planting and landscaping in the course of forestry or 
estate management are not construction operations. 
  

  


- Tree planting and landscaping as part of a new housing 
development are construction operations. 
A.31 

  

  

  
 
   
 
   

The only exception to finishing operations is carpet fitting.  
Our Statement of Practice (SP12/81) provides that carpet fitting  
(but no other floor covering) is regarded as excluded from the  
scheme. However, if carpet fitting is part of a mixed contract, then  
all the contract comes within the scheme. See paragraph A.7.  

A.32 

  


Some operations are specifically excluded from the scheme and  
these are explained in paragraphs A.34 to A.45 below.  
Non­
construction operations 
A.33 
   


Where a contract includes operations that are construction  
operations, and operations that are not construction operations,  
all payments for both types of work will fall within  
the scheme.  
 
 
Description 
Legislation 
Paragraph 
(See **Appendix** B) 
Drilling 
S74 
(3)(a) 
A.34 
 
 
Extraction 
" 
(3)(b) 
A.35 and 36 


Manufacture of building or 
engineering components and delivery 
" 
(3)(c) 
A.37 


Manufacture of components 
for systems 
" 
(3)(d) 
A.38 
Description 
Legislation 
Paragraph 
 
 
(See **Appendix** B) 


Professional work 
" 
(3)(e) 
A.39 and 40 
 
Artistic works 
" 
(3)(f) 
A.41 
 
 
Signwriting and signboards 
" 
(3)(g) 
A.42 


Seating, blinds and shutters 
" 
(3)(h) 
A.43 


Security systems 
" 
(3)(i) 
A.44 and 45 
A.34 

  
   
 

Drilling Drilling work connected with actual, physical extraction of minerals or natural resources is not a construction operation. 

## A.35 Extraction

|     |     |     |     |     |       |       |
|-----|-----|-----|-----|-----|-------|-------|
|     |     |     |     |     |       |       |
|     |     |     |     |     |       |       |
|     |     |     |     |     |       |       |
|     |     |     |     |     |       |       |
|     |     |     |     |     |       |       |
|     |     |     |     |     |       |       |

Extraction of minerals or natural resources is not a construction 
operation. Extraction includes: 
- drilling for oil and gas - pumping of oil and gas - digging for coal and other minerals from underground deposits 
- removal of coal and other minerals from underground deposits 
- associated surface workings, such as open cast mine quarrying. 


  

  

A.36  
Work connected with the primary purpose of mineral extraction is 
not a construction operation. This includes: 
- tunnelling, boring and shoring up tunnels in mines 
- installing rail systems, conveyor systems and other systems. 

|    |    |         |     |     |     |       |     |     |
|----|----|---------|-----|-----|-----|-------|-----|-----|
|    |    |         |     |     |     |       |     |     |
|    |    |         |     |     |     |       |     |     |
|    |    |         |     |     |     |       |     |     |

This is in contrast to tunnelling done in connection with the construction of a mainline railway for example, which would be a construction operation because it is an integral part of the construction of a work forming part of the land. 

|     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|
|     |     |     |     |     |     |
|     |     |     |     |     |     |
|     |     |     |     |     |     |
|     |     |     |     |     |     |
|     |     |     |     |     |     |
|     |     |     |     |     |     |
|     |     |     |     |     |     |

A.37  
Manufacture of building or engineering **components** 
and **delivery** 
Manufacture of the following is not a construction operation: 
- building or engineering components 
- building or engineering equipment - building or engineering material - building or engineering plant - building or engineering machinery. 

  
 
   
 
Delivery of these is also not a construction operation. 

|    |    |     |     |     |     |
|----|----|-----|-----|-----|-----|
|    |    |     |     |     |     |
|    |    |     |     |     |     |
|    |    |     |     |     |     |

A.38  
Manufacture of components for **systems** 
Manufacture of components for systems is not a construction operation. Examples of components for systems include components of: - heating 
- lighting - air­conditioning - ventilation. 


  
 
   
 
Delivery of these is also not a construction operation. 


  

A.39  
Professional **work** Professional work done by architects and surveyors as part of their normal professional discipline, whether on or off site, is not a construction operation. 

|    |    |    |     |     |       |       |     |     |     |
|----|----|----|-----|-----|-------|-------|-----|-----|-----|
|    |    |    |     |     |       |       |     |     |     |
|    |    |    |     |     |       |       |     |     |     |
|    |    |    |     |     |       |       |     |     |     |
|    |    |    |     |     |       |       |     |     |     |
|    |    |    |     |     |       |       |     |     |     |

The only exception is where a professional goes beyond their professional discipline to take on the role of developer or main contractor in addition to providing professional *services.* In this case, the work is not excluded from the scheme. 


  
 
   

  

  

A.40  
The work of other professionals is excluded only if they are acting 
purely as consultants. Typically, this would include the production 
of designs, plans, technical assessments and reports relating to 
construction projects including site testing. Any work that goes 
beyond a consultative or advisory role and becomes the 
supervision of labour or the co­ordination of construction work 
using that labour is not excluded from the scheme. 


  

  

  

A.41  
Artistic **works** 
All works that are **wholly** artistic are not regarded as construction operations. This means that if the works fulfil a normal functional purpose associated with a building, they are not excluded from the scheme. 

|              |    |        |     |       |     |       |     |     |     |
|--------------|----|--------|-----|-------|-----|-------|-----|-----|-----|
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| Example      |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| -            |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| A            |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| statue,      |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| even         |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| if           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| commissioned |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| with         |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| a            |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| new          |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| building,    |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| has          |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| no           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| function     |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| other        |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| than         |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| to           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| be           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| enjoyed      |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| as           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| an           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| artistic     |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| work.        |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| Its          |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| construction |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| and          |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| installation |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| would        |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| not          |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| be           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| regarded     |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| as           |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| a            |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| construction |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
| operation.   |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |
|              |    |        |     |       |     |       |     |     |     |

- A stained glass window has artistic merit, but it is a window 
that lets in light and is a decorative version of a common 
feature of a building, so its construction and installation would 
be regarded as a construction operation. 

|    |    |    |    |    |     |     |
|----|----|----|----|----|-----|-----|
|    |    |    |    |    |     |     |
|    |    |    |    |    |     |     |
|    |    |    |    |    |     |     |

A.42 
Signwriting and **signboards** 
Signwriting and work related to signboards and advertising boards is excluded from the scheme. This exclusion is very specific and does not extend to traffic signs or street furniture. 

|    |    |    |    |    |     |     |     |
|----|----|----|----|----|-----|-----|-----|
|    |    |    |    |    |     |     |     |
|    |    |    |    |    |     |     |     |
|    |    |    |    |    |     |     |     |
|    |    |    |    |    |     |     |     |

A.43 
Seating, blinds and **shutters** 
Seating in theatres, sports stadiums and other locations, and fixed seating is excluded from the scheme. This exclusion also covers louvered shutters, venetian blinds, other similar internal blinds, and curtain fittings. 



Awnings are not excluded. 

 

## A.44 Security **Systems**


  

Installation of security systems that are dedicated to security only is excluded from the scheme. Specific types of systems specifically mentioned in the legislation are burglar alarms, closed circuit television and public address systems. 

|    |    |    |     |       |     |     |     |     |
|----|----|----|-----|-------|-----|-----|-----|-----|
|    |    |    |     |       |     |     |     |     |
|    |    |    |     |       |     |     |     |     |

Example Installation of a computer controlled centralised locking system with programmable key cards, such as those used in hotels, would be excluded from the scheme. 

|     |     |     |       |     |
|-----|-----|-----|-------|-----|
|     |     |     |       |     |

A.45 
The installation must be a system and not simply a building 
feature that incidentally fulfils a security purpose. 

  

  

  

Examples - Doors equipped with locks provide a measure of security, but 
they do not represent a system, so they would not be excluded 
from the scheme. 

|      |     |     |     |     |           |     |     |
|------|-----|-----|-----|-----|-----------|-----|-----|
|      |     |     |     |     |           |     |     |
|      |     |     |     |     |           |     |     |
|      |     |     |     |     |           |     |     |

- Fencing may deter intruders but it is a traditional feature of 
buildings and their surrounds and not a security system, even 
if it has security features, so it would not be excluded from 
the scheme. 

## Appendix B Section 74

B.1 

Extract **from** Finance Act 2004 

In this chapter 'construction operations' means operations of a 
description specified in subsection (2), not being operations of a 
description specified in subsection (3); and references to 
construction operations: 
(a) except where the context otherwise requires, include 

references to the work of individuals participating in the 
carrying out of such operations, and 
(b) do not include references to operations carried out or to be 

  

  

  

  


carried out otherwise than in the United Kingdom (or the 
territorial sea of the United Kingdom). 

B.2 
The following operations are, subject to subsection (3), 
construction operations for the purposes of this chapter: 
(a) construction, alteration, repair, extension, demolition or 
dismantling of buildings or structures (whether permanent or 
not), including offshore installations, 
(b) construction, alteration, repair, extension or demolition of 
any works forming, or to form, part of the land, including (in 
particular) walls, roadworks, power lines, electronic 
communications apparatus, aircraft runways, docks and 
harbours, railways, inland waterways, pipelines, reservoirs, 
water mains, wells, sewers, industrial plant and installations 
for purposes of land drainage, coast protection or defence, 
(c) installation in any building or structure of systems of 
heating, lighting, air­conditioning, ventilation, power supply, 
drainage, sanitation, water supply or fire protection, 
(d) internal cleaning of buildings and structures, so far as carried 
out in the course of their construction, alteration, repair, 
extension or restoration, 
(e) painting or decorating the internal or external surfaces of 
any building or structure, 
(f) operations which form an integral part of, or are preparatory 

|     |     |     |     |     |     |     |
|-----|-----|-----|-----|-----|-----|-----|
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |
|     |     |     |     |     |     |     |

to, or are for rendering complete such operations as are previously described in this subsection, including site clearance, earth­moving, excavation, tunnelling and boring, laying of foundations, erection of scaffolding, site restoration, landscaping and the provision of roadways and other access works. 

B.3  
The following operations are not construction operations for the 
purposes of this chapter: 
(a)  drilling for, or extraction of, oil or natural gas, 
(b)  extraction (whether by underground or surface working) of 
minerals and tunnelling or boring, or construction of 
underground works, for this purpose, 
(c)  manufacture of building or engineering components or 
equipment, materials, plant or machinery, or delivery of any 
of these things to site, 
(d)  manufacture of components for systems of heating, lighting, 
air­conditioning, ventilation, power supply, drainage, 
sanitation, water supply or fire protection, or delivery of any 
of these things to site, 
(e)  the professional work of architects or surveyors, or of 
consultants in building, engineering, interior or exterior 
decoration or the laying­out of landscape, 
(f)  the making, installation and repair of artistic works, being 
sculptures, murals and other works which are wholly artistic 
in nature, 

(g)  signwriting and erecting, installing and repairing signboards 
and advertisements, 

  

(h)  the installation of seating, blinds and shutters, 
(i)  the installation of security systems, including burglar alarms, 
closed circuit television and public address systems. 


B.4  
The Treasury may by order made by statutory instrument amend 
either or both of subsections (2) and (3) by: 
 
(a)  adding, (b)  varying, or (c)  removing 


any description of operations. 

|    |    |     |     |     |     |     |     |     |     |
|----|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |    |     |     |     |     |     |     |     |     |
|    |    |     |     |     |     |     |     |     |     |

B.5  
No statutory instrument containing an order under subsection (4) 
shall be made unless a draft of the instrument has been laid 
before and approved by a resolution of the House of Commons. 

|    |     |     |     |     |     |     |     |     |
|----|-----|-----|-----|-----|-----|-----|-----|-----|
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |
|    |     |     |     |     |     |     |     |     |

This Appendix gives guidance on construction operations that are included within the scheme and those that are excluded. 

For a A­Z guide please go to www.hmrc.gov.uk/manuals/cisrmanual/cisr14330.htm The guidance is not exhaustive so if you are unsure whether work is within the scope of the scheme, please contact us. 

 
 
Phone: 
0845 366 **7899** 
Internet: 
www.hmrc.gov.uk/cis 

|    |       |     |     |     |     |     |     |
|----|-------|-----|-----|-----|-----|-----|-----|
|    |       |     |     |     |     |     |     |
|    |       |     |     |     |     |     |     |

If a contract includes some construction operations that are within the scheme and some that are excluded, all payments made under that contract will come within the scheme. 


  

Contracts that 
include work that is 
included AND work 
that is excluded 

|              |     |
|--------------|-----|
| Status       |     |
|              |     |
| of           |     |
|              |     |
| private      |     |
|              |     |
| householders |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |

Private householders are not contractors for the purposes of the scheme but if you do any of the work listed below for a contractor who is doing the work for a private householder, the contractor will have to operate the scheme on payments they make to you. 

|              |     |
|--------------|-----|
| Operations   |     |
|              |     |
| included     |     |
|              |     |
| Operations   |     |
|              |     |
| excluded     |     |
|              |     |
|              |     |
|              |     |
| Planning     |     |
|              |     |
| List         |     |
|              |     |
| of           |     |
|              |     |
| included     |     |
|              |     |
| and          |     |
|              |     |
| excluded     |     |
|              |     |
| operations   |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
|              |     |
| None         |     |
|              |     |
| Professional |     |
|              |     |
| work         |     |
|              |     |
| (including   |     |
|              |     |
| the          |     |
|              |     |
| ancillary    |     |
|              |     |
| work         |     |
|              |     |
| of           |     |
|              |     |
| engineers,   |     |
|              |     |
| draughtsmen, |     |
|              |     |
| scientists   |     |
|              |     |
| and          |     |
|              |     |
| technicians) |     |
|              |     |
| of           |     |
|              |     |
| architects,  |     |
|              |     |
| surveyors    |     |
|              |     |
| or           |     |
|              |     |
| consultants  |     |
|              |     |
| in           |     |
|              |     |
| building,    |     |
|              |     |
| engineering, |     |
|              |     |
| decoration   |     |
|              |     |
| (interior    |     |
|              |     |
| or           |     |
|              |     |
| exterior)    |     |
|              |     |
| or           |     |
|              |     |
| landscaping. |     |
|              |     |
 
 
Operations **included** 
Operations **excluded** 
 
Site *preparation* 
 
 
Demolition of, for example, 
Delivery of materials. 


buildings, structures and 
tree­felling. 


Preparation of site and 
Transport of spoil from site. 


site­clearance, earth­moving on site, excavation, tunnelling 
and boring. Construction Preparation and laying of 
Manufacture or offsite 


foundations and piling. 
fabrication of components or 
Actual construction, alteration 
equipment, materials, plant or 
or repair of a permanent or 
machinery and delivery of 
temporary building or civil, 
these to the site. For example: 


chemical or other industrial 
- traditional building 
engineering work or industrial 
materials 

  


plant or structure. For 
- prefabricated beams and 
example: 
panels 
  
 
- asbestos removal 
- ready­mixed concrete. 
- storage tanks - silos - pylons - cranes or derricks 
- pumps. Construction of site facilities 
Manufacture and delivery of 


including site huts, Portakabins 
prefabricated site facilities. 

 


and site hoardings. 
Running of site facilities such 
as canteens, hostels, offices, 
toilets and medical centres or 
the supply of security guards. 
Installation of power lines, 
Installation or replacement of 
pipelines, gas mains, sewers, 
telecommunication or 


drainage, cable television and 
computer wiring through 


telecommunications 
pre­existing ducting in 
 
distribution systems. 
buildings. 
|               |              | Operations   |
|---------------|--------------|--------------|
|               |              |              |
| included      |              |              |
|               |              |              |
| Operations    |              |              |
|               |              |              |
| excluded      |              |              |
|               |              |              |
|               | Construction |              |
|               |              |              |
| (continued)   |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Installation  |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| closed­circuit |              |              |
|               |              |              |
| television    |              |              |
|               |              |              |
| for           |              |              |
|               |              |              |
| purposes      |              |              |
|               |              |              |
| other         |              |              |
|               |              |              |
| than          |              |              |
|               |              |              |
| security      |              |              |
|               |              |              |
| (such         |              |              |
|               |              |              |
| as            |              |              |
|               |              |              |
| traffic       |              |              |
|               |              |              |
| management).  |              |              |
|               |              |              |
|               |              |              |
| Installation  |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| public        |              |              |
|               |              |              |
| services.     |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Construction, |              |              |
|               |              |              |
| repair        |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| Delivery      |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| road­making    |              |              |
|               |              |              |
| resurfacing   |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| roads         |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| materials.    |              |              |
|               |              |              |
| bridges       |              |              |
|               |              |              |
| including     |              |              |
|               |              |              |
| white­lining.  |              |              |
|               |              |              |
| Setting       |              |              |
|               |              |              |
| out           |              |              |
|               |              |              |
| traffic       |              |              |
|               |              |              |
| cones.        |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Provision     |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| temporary     |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| permanent     |              |              |
|               |              |              |
| roadways      |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| other         |              |              |
|               |              |              |
| access        |              |              |
|               |              |              |
| works         |              |              |
|               |              |              |
| such          |              |              |
|               |              |              |
| as            |              |              |
|               |              |              |
| drives.       |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Erection      |              |              |
|               |              |              |
| or            |              |              |
|               |              |              |
| dismantling   |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| Hire          |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| scaffolding   |              |              |
|               |              |              |
| equipment     |              |              |
|               |              |              |
| scaffolding   |              |              |
|               |              |              |
| falsework     |              |              |
|               |              |              |
| (without      |              |              |
|               |              |              |
| labour).      |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| formwork.     |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Plant         |              |              |
|               |              |              |
| hire          |              |              |
|               |              |              |
| with          |              |              |
|               |              |              |
| operator      |              |              |
|               |              |              |
| for           |              |              |
|               |              |              |
| Delivery,     |              |              |
|               |              |              |
| repair        |              |              |
|               |              |              |
| or            |              |              |
|               |              |              |
| use           |              |              |
|               |              |              |
| on            |              |              |
|               |              |              |
| site.         |              |              |
|               |              |              |
| maintenance   |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| construction  |              |              |
|               |              |              |
| plant         |              |              |
|               |              |              |
| or            |              |              |
|               |              |              |
| hire          |              |              |
|               |              |              |
| equipment     |              |              |
|               |              |              |
| without       |              |              |
|               |              |              |
| an            |              |              |
|               |              |              |
| operator.     |              |              |
|               |              |              |
| For           |              |              |
|               |              |              |
| example,      |              |              |
|               |              |              |
| concrete      |              |              |
|               |              |              |
| mixers,       |              |              |
|               |              |              |
| pumps         |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| skips.        |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
|               |              |              |
| Installation  |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| fire          |              |              |
|               |              |              |
| protection    |              |              |
|               |              |              |
| Installation  |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| fire          |              |              |
|               |              |              |
| alarms,       |              |              |
|               |              |              |
| systems       |              |              |
|               |              |              |
| designed      |              |              |
|               |              |              |
| specifically  |              |              |
|               |              |              |
| security      |              |              |
|               |              |              |
| systems       |              |              |
|               |              |              |
| including     |              |              |
|               |              |              |
| to            |              |              |
|               |              |              |
| protect       |              |              |
|               |              |              |
| the           |              |              |
|               |              |              |
| fabric        |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| the           |              |              |
|               |              |              |
| burglar       |              |              |
|               |              |              |
| alarms,       |              |              |
|               |              |              |
| closed­circuit |              |              |
|               |              |              |
| building      |              |              |
|               |              |              |
| (such         |              |              |
|               |              |              |
| as            |              |              |
|               |              |              |
| sprinkler     |              |              |
|               |              |              |
| television    |              |              |
|               |              |              |
| as            |              |              |
|               |              |              |
| part          |              |              |
|               |              |              |
| of            |              |              |
|               |              |              |
| a             |              |              |
|               |              |              |
| security      |              |              |
|               |              |              |
| systems,      |              |              |
|               |              |              |
| fireproof     |              |              |
|               |              |              |
| cladding)     |              |              |
|               |              |              |
| system,       |              |              |
|               |              |              |
| and           |              |              |
|               |              |              |
| public        |              |              |
|               |              |              |
| rather        |              |              |
|               |              |              |
| than          |              |              |
|               |              |              |
| a             |              |              |
|               |              |              |
| fire          |              |              |
|               |              |              |
| warning       |              |              |
|               |              |              |
| address       |              |              |
|               |              |              |
| systems.      |              |              |
|               |              |              |
| (alarm)       |              |              |
|               |              |              |
| system.       |              |              |
|               |              |              |

## Operations **Included** Operations **Excluded** Construction *(Continued)*

|                  |     |
|------------------|-----|
|                  |     |
|                  |     |
| Installation     |     |
|                  |     |
| of               |     |
|                  |     |
| prefabricated    |     |
|                  |     |
| components       |     |
|                  |     |
| or               |     |
|                  |     |
| equipment        |     |
|                  |     |
| under            |     |
|                  |     |
| 'supply          |     |
|                  |     |
| and              |     |
|                  |     |
| fix'             |     |
|                  |     |
| arrangements.    |     |
|                  |     |
| Transport        |     |
|                  |     |
| of               |     |
|                  |     |
| materials        |     |
|                  |     |
| on               |     |
|                  |     |
| site.            |     |
|                  |     |
|                  |     |
|                  |     |
| Transport        |     |
|                  |     |
| of               |     |
|                  |     |
| materials        |     |
|                  |     |
| from             |     |
|                  |     |
| site             |     |
|                  |     |
| to               |     |
|                  |     |
| site             |     |
|                  |     |
| on               |     |
|                  |     |
| the              |     |
|                  |     |
| public           |     |
|                  |     |
| highway.         |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Assembly         |     |
|                  |     |
| of               |     |
|                  |     |
| temporary        |     |
|                  |     |
| stages           |     |
|                  |     |
| and              |     |
|                  |     |
| exhibition       |     |
|                  |     |
| stands           |     |
|                  |     |
| including        |     |
|                  |     |
| lighting.        |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| External         |     |
|                  |     |
| cleaning         |     |
|                  |     |
| (other           |     |
|                  |     |
| than             |     |
|                  |     |
| painting         |     |
|                  |     |
| or               |     |
|                  |     |
| decorating)      |     |
|                  |     |
| of               |     |
|                  |     |
| buildings        |     |
|                  |     |
| and              |     |
|                  |     |
| structures.      |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Internal         |     |
|                  |     |
| cleaning         |     |
|                  |     |
| of               |     |
|                  |     |
| buildings        |     |
|                  |     |
| and              |     |
|                  |     |
| structures       |     |
|                  |     |
| carried          |     |
|                  |     |
| out              |     |
|                  |     |
| in               |     |
|                  |     |
| the              |     |
|                  |     |
| course           |     |
|                  |     |
| of,              |     |
|                  |     |
| or               |     |
|                  |     |
| on               |     |
|                  |     |
| completion       |     |
|                  |     |
| of,              |     |
|                  |     |
| their            |     |
|                  |     |
| construction,    |     |
|                  |     |
| alteration,      |     |
|                  |     |
| extension,       |     |
|                  |     |
| repair           |     |
|                  |     |
| or               |     |
|                  |     |
| restoration.     |     |
|                  |     |
|                  |     |
|                  |     |
| Drilling         |     |
|                  |     |
| for,             |     |
|                  |     |
| or               |     |
|                  |     |
| extraction       |     |
|                  |     |
| of,              |     |
|                  |     |
| oil              |     |
|                  |     |
| or               |     |
|                  |     |
| natural          |     |
|                  |     |
| gas.             |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Extraction       |     |
|                  |     |
| of               |     |
|                  |     |
| minerals,        |     |
|                  |     |
| boring           |     |
|                  |     |
| or               |     |
|                  |     |
| construction     |     |
|                  |     |
| of               |     |
|                  |     |
| underground      |     |
|                  |     |
| works            |     |
|                  |     |
| for              |     |
|                  |     |
| this             |     |
|                  |     |
| purpose.         |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Work             |     |
|                  |     |
| done             |     |
|                  |     |
| on               |     |
|                  |     |
| installations    |     |
|                  |     |
| (such            |     |
|                  |     |
| as               |     |
|                  |     |
| rigs,            |     |
|                  |     |
| pipelines,       |     |
|                  |     |
| construction     |     |
|                  |     |
| platforms)       |     |
|                  |     |
| maintained       |     |
|                  |     |
| or               |     |
|                  |     |
| intended         |     |
|                  |     |
| to               |     |
|                  |     |
| be               |     |
|                  |     |
| established      |     |
|                  |     |
| for              |     |
|                  |     |
| underwater       |     |
|                  |     |
| exploration      |     |
|                  |     |
| for,             |     |
|                  |     |
| or               |     |
|                  |     |
| exploitation     |     |
|                  |     |
| of,              |     |
|                  |     |
| minerals         |     |
|                  |     |
| where            |     |
|                  |     |
| the              |     |
|                  |     |
| work             |     |
|                  |     |
| is               |     |
|                  |     |
| on               |     |
|                  |     |
| land             |     |
|                  |     |
| or               |     |
|                  |     |
| in               |     |
|                  |     |
| the              |     |
|                  |     |
| UK               |     |
|                  |     |
| territorial      |     |
|                  |     |
| waters           |     |
|                  |     |
| (up              |     |
|                  |     |
| to               |     |
|                  |     |
| the              |     |
|                  |     |
| 12­mile           |     |
|                  |     |
| limit).          |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Manufacture,     |     |
|                  |     |
| delivery,        |     |
|                  |     |
| repair           |     |
|                  |     |
| or               |     |
|                  |     |
| maintenance      |     |
|                  |     |
| of               |     |
|                  |     |
| these            |     |
|                  |     |
| items.           |     |
|                  |     |
| Replacement      |     |
|                  |     |
| of               |     |
|                  |     |
| system           |     |
|                  |     |
| parts            |     |
|                  |     |
| not              |     |
|                  |     |
| involving        |     |
|                  |     |
| other            |     |
|                  |     |
| construction     |     |
|                  |     |
| operations       |     |
|                  |     |
| (for             |     |
|                  |     |
| example,         |     |
|                  |     |
| taps             |     |
|                  |     |
| or               |     |
|                  |     |
| a                |     |
|                  |     |
| radiator).       |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
|                  |     |
| Installation     |     |
|                  |     |
| of               |     |
|                  |     |
| systems          |     |
|                  |     |
| of               |     |
|                  |     |
| heating,         |     |
|                  |     |
| lighting,        |     |
|                  |     |
| air­conditioning, |     |
|                  |     |
| ventilation,     |     |
|                  |     |
| power            |     |
|                  |     |
| supply           |     |
|                  |     |
| and              |     |
|                  |     |
| distribution,    |     |
|                  |     |
| drainage,        |     |
|                  |     |
| sanitation,      |     |
|                  |     |
| water            |     |
|                  |     |
| supply           |     |
|                  |     |
| and              |     |
|                  |     |
| distribution,    |     |
|                  |     |
| and              |     |
|                  |     |
| fire             |     |
|                  |     |
| protection       |     |
|                  |     |
| works.           |     |
|                  |     |

## Operations **Included** Operations **Excluded** Construction *(Continued)*

|                 |     |     |     |
|-----------------|-----|-----|-----|
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Installation    |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| lifts,          |     |     |     |
|                 |     |     |     |
| plant,          |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| Servicing,      |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| machinery       |     |     |     |
|                 |     |     |     |
| needed          |     |     |     |
|                 |     |     |     |
| by              |     |     |     |
|                 |     |     |     |
| the             |     |     |     |
|                 |     |     |     |
| maintenance     |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| these           |     |     |     |
|                 |     |     |     |
| items.          |     |     |     |
|                 |     |     |     |
| specification   |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| a               |     |     |     |
|                 |     |     |     |
| building        |     |     |     |
|                 |     |     |     |
| Stairlifts      |     |     |     |
|                 |     |     |     |
| requiring       |     |     |     |
|                 |     |     |     |
| no              |     |     |     |
|                 |     |     |     |
| under           |     |     |     |
|                 |     |     |     |
| construction    |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| alteration      |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| to              |     |     |     |
|                 |     |     |     |
| alteration.     |     |     |     |
|                 |     |     |     |
| the             |     |     |     |
|                 |     |     |     |
| building.       |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Construction    |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| industrial      |     |     |     |
|                 |     |     |     |
| plant.          |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Site            |     |     |     |
|                 |     |     |     |
| restoration     |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| Tree            |     |     |     |
|                 |     |     |     |
| planting        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| felling         |     |     |     |
|                 |     |     |     |
| in              |     |     |     |
|                 |     |     |     |
| the             |     |     |     |
|                 |     |     |     |
| landscaping.    |     |     |     |
|                 |     |     |     |
| ordinary        |     |     |     |
|                 |     |     |     |
| course          |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| forestry        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| estate          |     |     |     |
|                 |     |     |     |
| management.     |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Installation,   |     |     |     |
|                 |     |     |     |
| structural      |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| Manufacture     |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| delivery        |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| painting        |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| lamp            |     |     |     |
|                 |     |     |     |
| lamp            |     |     |     |
|                 |     |     |     |
| standards.      |     |     |     |
|                 |     |     |     |
| Routine         |     |     |     |
|                 |     |     |     |
| standards,      |     |     |     |
|                 |     |     |     |
| traffic         |     |     |     |
|                 |     |     |     |
| lights,         |     |     |     |
|                 |     |     |     |
| maintenance     |     |     |     |
|                 |     |     |     |
| such            |     |     |     |
|                 |     |     |     |
| as              |     |     |     |
|                 |     |     |     |
| cleaning        |     |     |     |
|                 |     |     |     |
| parking         |     |     |     |
|                 |     |     |     |
| meters          |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| street          |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| general         |     |     |     |
|                 |     |     |     |
| replacement.    |     |     |     |
|                 |     |     |     |
| furniture.      |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Construction    |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| concrete        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| Manufacture     |     |     |     |
|                 |     |     |     |
| offsite         |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| marble          |     |     |     |
|                 |     |     |     |
| floors.         |     |     |     |
|                 |     |     |     |
| delivery        |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| flooring        |     |     |     |
|                 |     |     |     |
| materials.      |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Fitting         |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| eye             |     |     |     |
|                 |     |     |     |
| bolts           |     |     |     |
|                 |     |     |     |
| whether         |     |     |     |
|                 |     |     |     |
| internal        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| external.       |     |     |     |
|                 |     |     |     |
| Installation    |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| to:             |     |     |     |
|                 |     |     |     |
| Manufacture     |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| delivery        |     |     |     |
|                 |     |     |     |
| of:             |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| glazing         |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| glazing         |     |     |     |
|                 |     |     |     |
| materials       |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| doors           |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| rolling         |     |     |     |
|                 |     |     |     |
| grills          |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| computer        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| security        |     |     |     |
|                 |     |     |     |
| shutters        |     |     |     |
|                 |     |     |     |
| instrumentation |     |     |     |
|                 |     |     |     |
| systems         |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| kitchens        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| bathrooms       |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| thermal         |     |     |     |
|                 |     |     |     |
| insulation      |     |     |     |
|                 |     |     |     |
| materials       |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| shop­fittings    |     |     |     |
|                 |     |     |     |
| including       |     |     |     |
|                 |     |     |     |
| fixed           |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| heating         |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| ventilation     |     |     |     |
|                 |     |     |     |
| furniture       |     |     |     |
|                 |     |     |     |
| (except         |     |     |     |
|                 |     |     |     |
| seating         |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| systems         |     |     |     |
|                 |     |     |     |
| freestanding    |     |     |     |
|                 |     |     |     |
| display         |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| doors           |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| rolling         |     |     |     |
|                 |     |     |     |
| grills          |     |     |     |
|                 |     |     |     |
| cabinets).      |     |     |     |
|                 |     |     |     |
| -               |     |     |     |
|                 |     |     |     |
| painting        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| decorating      |     |     |     |
|                 |     |     |     |
| materials.      |     |     |     |
|                 |     |     |     |

## Operations **Included** Operations **Excluded** Construction *(Continued)*

|                 |     |     |     |
|-----------------|-----|-----|-----|
|                 |     |     |     |
|                 |     |     |     |
| Painting        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| decorating      |     |     |     |
|                 |     |     |     |
| the             |     |     |     |
|                 |     |     |     |
| internal        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| external        |     |     |     |
|                 |     |     |     |
| surfaces        |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| any             |     |     |     |
|                 |     |     |     |
| building        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| structure.      |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Manufacture,    |     |     |     |
|                 |     |     |     |
| delivery        |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| installation    |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| seating,        |     |     |     |
|                 |     |     |     |
| blinds          |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| louvered        |     |     |     |
|                 |     |     |     |
| shutters.       |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Manufacture,    |     |     |     |
|                 |     |     |     |
| installation    |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| artistic        |     |     |     |
|                 |     |     |     |
| works           |     |     |     |
|                 |     |     |     |
| (for            |     |     |     |
|                 |     |     |     |
| example         |     |     |     |
|                 |     |     |     |
| sculptures      |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| murals)         |     |     |     |
|                 |     |     |     |
| which           |     |     |     |
|                 |     |     |     |
| are             |     |     |     |
|                 |     |     |     |
| wholly          |     |     |     |
|                 |     |     |     |
| decorative      |     |     |     |
|                 |     |     |     |
| in              |     |     |     |
|                 |     |     |     |
| nature          |     |     |     |
|                 |     |     |     |
| (not            |     |     |     |
|                 |     |     |     |
| functional      |     |     |     |
|                 |     |     |     |
| items           |     |     |     |
|                 |     |     |     |
| caught          |     |     |     |
|                 |     |     |     |
| by              |     |     |     |
|                 |     |     |     |
| the             |     |     |     |
|                 |     |     |     |
| scheme          |     |     |     |
|                 |     |     |     |
| which           |     |     |     |
|                 |     |     |     |
| incidentally    |     |     |     |
|                 |     |     |     |
| have            |     |     |     |
|                 |     |     |     |
| artistic        |     |     |     |
|                 |     |     |     |
| merit).         |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Manufacture     |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| installation    |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| solar,          |     |     |     |
|                 |     |     |     |
| blackout        |     |     |     |
|                 |     |     |     |
| or              |     |     |     |
|                 |     |     |     |
| anti­shatter     |     |     |     |
|                 |     |     |     |
| film.           |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
|                 |     |     |     |
| Signwriting     |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| erecting,       |     |     |     |
|                 |     |     |     |
| installation    |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| repair          |     |     |     |
|                 |     |     |     |
| of              |     |     |     |
|                 |     |     |     |
| signboards      |     |     |     |
|                 |     |     |     |
| and             |     |     |     |
|                 |     |     |     |
| advertisements. |     |     |     |
|                 |     |     |     |

## Operations **Included** Operations **Excluded** Finishing *Operations*

 
  

 


Fitting of: - floor coverings, such as vinyl, 
linoleum (but not carpet) 
and laminated wooden 
flooring 
- pigeon mesh - TV aerials and satellite 
receivers. 
 
 
Installation of refrigeration units. 


But only where *these* operations render *complete* a 
building or structure that has 
been constructed or *altered.* 



Examples of This Appendix gives examples of the deduction from 


deductions **from** 
subcontractors paid under deduction. 

subcontractors' 
payments 

Deductions at Examples D1 to D3 show deductions at the standard rate of 

  


the **standard** 
20 per cent which was the rate in force at the time of printing of 
 
rate this guide. 


## Example D1 Where No Materials Are Supplied **('Labour­Only')**



A labour­only subcontractor does work on site for £200 
£ 
 
 
Total payment 
200 


Amount deducted at 20% 
–40 


Net payment to **subcontractor** 
160 

The contractor calculates the deduction (£40), which has to be paid to our accounts office. The labour­only subcontractor receives the balance of £160. 

|    |    |    |     |     |     |     |     |
|----|----|----|-----|-----|-----|-----|-----|
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |

Entries on the Contractor's monthly **return** In this example, the contractor should enter the following amounts in the appropriate boxes on the Contractor's monthly return: 

 
Total payment 
200 


Direct cost of materials used 
 
Amount deducted 
40 

  

  

Example D2 The following is an example of a calculation where materials as well as labour are supplied ('supply and fix'). 

|    |     |     |     |
|----|-----|-----|-----|
|    |     |     |     |
|    |     |     |     |
|    |     |     |     |
|    |     |     |     |

Where the subcontractor is not registered for VAT, any VAT they had to pay on materials should be **included** in the cost of materials when calculating the CIS deduction. 


  

  

  

  

A tiling subcontractor, who is not VAT­registered, agrees to tile a wall and to supply the necessary materials for a total payment of 
£535. The materials cost the subcontractor a total of £235 
(£200 + £35 for VAT). 

£ 
 
 
Labour charge 
300 
Materials 
235 


Amount due (invoice **amount)** 
535 
 
 
Calculation of **deduction** 
 
Total payment 
535 


Less cost of materials (inclusive of VAT) 
–235 


Amount liable to deduction 
300 


Amount deducted at 20% 
–60 


Net payment to **subcontractor** 
475 

  

The contractor deducts the cost of materials from the price for the whole job and calculates the deduction on the difference of 
£300. The contractor has to pay £60 to our accounts office and pays £475 (£535 - £60) to the subcontractor. 

|              |    |    |     |     |     |     |     |
|--------------|----|----|-----|-----|-----|-----|-----|
|              |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Entries      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| on           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| the          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Contractor's |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| monthly      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| return       |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| In           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| this         |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| example,     |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| the          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| contractor   |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| should       |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| enter        |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| the          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| following    |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| amounts      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| in           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| the          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| appropriate  |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| boxes        |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| on           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| the          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Contractor's |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| monthly      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| return:      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Total        |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| payment      |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| 535          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Direct       |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| cost         |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| of           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| materials    |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| used         |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| 235          |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| Amount       |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| deducted     |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |
| 60           |    |    |     |     |     |     |     |
|              |    |    |     |     |     |     |     |

## Example D3

|     |       |     |     |       |     |     |
|-----|-------|-----|-----|-------|-----|-----|
|     |       |     |     |       |     |     |

The following is an example of a calculation where materials as well as labour are supplied ('supply and fix'). 

|     |     |     |
|-----|-----|-----|
|     |     |     |
|     |     |     |
|     |     |     |
|     |     |     |

Where the subcontractor is registered for VAT, any VAT they had to pay on materials should be **excluded** from the cost of materials when calculating the CIS deduction. 

|    |    |     |     |     |     |     |       |     |         |
|----|----|-----|-----|-----|-----|-----|-------|-----|---------|
|    |    |     |     |     |     |     |       |     |         |
|    |    |     |     |     |     |     |       |     |         |
|    |    |     |     |     |     |     |       |     |         |

For the total cost of £600, a subcontractor who is a taxable person for VAT purposes, agrees to paint the interior of a building and to supply the materials. The painter pays £235 for the materials, which includes VAT of £35. 

£ 
 
 
Labour charge 
400 
Materials 
200 
 
Total payment 
600 
 
Add VAT 
105 


Amount due (invoice **amount)** 
705 

## Calculation Of **Deduction**

|               |     |     |     |
|---------------|-----|-----|-----|
| Total         |     |     |     |
|               |     |     |     |
| payment       |     |     |     |
|               |     |     |     |
| (exclusive    |     |     |     |
|               |     |     |     |
| of            |     |     |     |
|               |     |     |     |
| VAT)          |     |     |     |
|               |     |     |     |
| 600           |     |     |     |
|               |     |     |     |
|               |     |     |     |
| Less          |     |     |     |
|               |     |     |     |
| cost          |     |     |     |
|               |     |     |     |
| of            |     |     |     |
|               |     |     |     |
| materials     |     |     |     |
|               |     |     |     |
| (exclusive    |     |     |     |
|               |     |     |     |
| of            |     |     |     |
|               |     |     |     |
| VAT)          |     |     |     |
|               |     |     |     |
| –200          |     |     |     |
|               |     |     |     |
|               |     |     |     |
| Amount        |     |     |     |
|               |     |     |     |
| liable        |     |     |     |
|               |     |     |     |
| to            |     |     |     |
|               |     |     |     |
| deduction     |     |     |     |
|               |     |     |     |
| 400           |     |     |     |
|               |     |     |     |
|               |     |     |     |
| Amount        |     |     |     |
|               |     |     |     |
| deducted      |     |     |     |
|               |     |     |     |
| at            |     |     |     |
|               |     |     |     |
| 20%           |     |     |     |
|               |     |     |     |
| –80           |     |     |     |
|               |     |     |     |
|               |     |     |     |
| Net           |     |     |     |
|               |     |     |     |
| payment       |     |     |     |
|               |     |     |     |
| to            |     |     |     |
|               |     |     |     |
| subcontractor |     |     |     |
|               |     |     |     |
| 625           |     |     |     |
|               |     |     |     |
|               |     |     |     |
|               |     |     |     |
| The           |     |     |     |
|               |     |     |     |
| subcontractor |     |     |     |
|               |     |     |     |
| is            |     |     |     |
|               |     |     |     |
| paid          |     |     |     |
|               |     |     |     |
| £625,         |     |     |     |
|               |     |     |     |
| which         |     |     |     |
|               |     |     |     |
| is            |     |     |     |
|               |     |     |     |
| the           |     |     |     |
|               |     |     |     |
| invoice       |     |     |     |
|               |     |     |     |
| amount        |     |     |     |
|               |     |     |     |
| (£705)        |     |     |     |
|               |     |     |     |
| less          |     |     |     |
|               |     |     |     |
| the           |     |     |     |
|               |     |     |     |
| deduction     |     |     |     |
|               |     |     |     |
| (£80).        |     |     |     |
|               |     |     |     |
|               |     |     |     |
|               |     |     |     |
|               |     |     |     |
|               |     |     |     |

Entries on the Contractor's monthly **return** 
In this example, the contractor should enter the following amounts in the appropriate boxes on the Contractor's monthly return: 

 
Total payment 
600 


Direct cost of materials used 200 
 
Amount deducted 
80 

Deductions at  
Examples D4 to D6 show deductions at the higher rate of 

  

  


the higher **rate**  
30 per cent. This rate is used for illustration purposes and may or may not be the rate in force at the time of reading this guide. 

## Example D4

|                |     |     |     |     |
|----------------|-----|-----|-----|-----|
| Where          |     |     |     |     |
|                |     |     |     |     |
| no             |     |     |     |     |
|                |     |     |     |     |
| materials      |     |     |     |     |
|                |     |     |     |     |
| are            |     |     |     |     |
|                |     |     |     |     |
| supplied       |     |     |     |     |
|                |     |     |     |     |
| ('labour­only') |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| A              |     |     |     |     |
|                |     |     |     |     |
| labour­only     |     |     |     |     |
|                |     |     |     |     |
| subcontractor  |     |     |     |     |
|                |     |     |     |     |
| does           |     |     |     |     |
|                |     |     |     |     |
| work           |     |     |     |     |
|                |     |     |     |     |
| on             |     |     |     |     |
|                |     |     |     |     |
| site           |     |     |     |     |
|                |     |     |     |     |
| for            |     |     |     |     |
|                |     |     |     |     |
| £200           |     |     |     |     |
|                |     |     |     |     |
| £              |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Total          |     |     |     |     |
|                |     |     |     |     |
| payment        |     |     |     |     |
|                |     |     |     |     |
| 200            |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Amount         |     |     |     |     |
|                |     |     |     |     |
| deducted       |     |     |     |     |
|                |     |     |     |     |
| at             |     |     |     |     |
|                |     |     |     |     |
| 30%            |     |     |     |     |
|                |     |     |     |     |
| –60            |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Net            |     |     |     |     |
|                |     |     |     |     |
| payment        |     |     |     |     |
|                |     |     |     |     |
| to             |     |     |     |     |
|                |     |     |     |     |
| subcontractor  |     |     |     |     |
|                |     |     |     |     |
| 140            |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| The            |     |     |     |     |
|                |     |     |     |     |
| contractor     |     |     |     |     |
|                |     |     |     |     |
| calculates     |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| deduction      |     |     |     |     |
|                |     |     |     |     |
| (£60),         |     |     |     |     |
|                |     |     |     |     |
| which          |     |     |     |     |
|                |     |     |     |     |
| has            |     |     |     |     |
|                |     |     |     |     |
| to             |     |     |     |     |
|                |     |     |     |     |
| be             |     |     |     |     |
|                |     |     |     |     |
| paid           |     |     |     |     |
|                |     |     |     |     |
| to             |     |     |     |     |
|                |     |     |     |     |
| our            |     |     |     |     |
|                |     |     |     |     |
| accounts       |     |     |     |     |
|                |     |     |     |     |
| office.        |     |     |     |     |
|                |     |     |     |     |
| The            |     |     |     |     |
|                |     |     |     |     |
| labour­only     |     |     |     |     |
|                |     |     |     |     |
| subcontractor  |     |     |     |     |
|                |     |     |     |     |
| receives       |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| balance        |     |     |     |     |
|                |     |     |     |     |
| of             |     |     |     |     |
|                |     |     |     |     |
| £140.          |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Entries        |     |     |     |     |
|                |     |     |     |     |
| on             |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| Contractor's   |     |     |     |     |
|                |     |     |     |     |
| monthly        |     |     |     |     |
|                |     |     |     |     |
| return         |     |     |     |     |
|                |     |     |     |     |
| In             |     |     |     |     |
|                |     |     |     |     |
| this           |     |     |     |     |
|                |     |     |     |     |
| example,       |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| contractor     |     |     |     |     |
|                |     |     |     |     |
| should         |     |     |     |     |
|                |     |     |     |     |
| enter          |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| following      |     |     |     |     |
|                |     |     |     |     |
| amounts        |     |     |     |     |
|                |     |     |     |     |
| in             |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| appropriate    |     |     |     |     |
|                |     |     |     |     |
| boxes          |     |     |     |     |
|                |     |     |     |     |
| on             |     |     |     |     |
|                |     |     |     |     |
| the            |     |     |     |     |
|                |     |     |     |     |
| Contractor's   |     |     |     |     |
|                |     |     |     |     |
| monthly        |     |     |     |     |
|                |     |     |     |     |
| return:        |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Total          |     |     |     |     |
|                |     |     |     |     |
| payment        |     |     |     |     |
|                |     |     |     |     |
| 200            |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Direct         |     |     |     |     |
|                |     |     |     |     |
| cost           |     |     |     |     |
|                |     |     |     |     |
| of             |     |     |     |     |
|                |     |     |     |     |
| materials      |     |     |     |     |
|                |     |     |     |     |
| used           |     |     |     |     |
|                |     |     |     |     |
|                |     |     |     |     |
| Amount         |     |     |     |     |
|                |     |     |     |     |
| deducted       |     |     |     |     |
|                |     |     |     |     |
| 60             |     |     |     |     |
|                |     |     |     |     |

  

  

Example D5 The following is an example of a calculation where materials as well as labour are supplied ('supply and fix'). 

|    |     |     |     |
|----|-----|-----|-----|
|    |     |     |     |
|    |     |     |     |
|    |     |     |     |
|    |     |     |     |

Where the subcontractor is not registered for VAT, any VAT they had to pay on materials should be **included** in the cost of materials when calculating the CIS deduction. 


  

  

  

  

A tiling subcontractor, who is not VAT­registered, agrees to tile a wall and to supply the necessary materials for a total payment of 
£535. The materials cost the subcontractor a total of £235 
(£200 + £35 for VAT). 

£ 
 
 
Labour charge 
300 
Materials 
235 


Amount due (invoice **amount)** 
535 
 
 
Calculation of **deduction** 
 
Total payment 
535 


Less cost of materials (inclusive of VAT) 
–235 


Amount liable to deduction 
300 
 
 
Amount deducted at 30% 
–90 


Net payment to **subcontractor** 
445 

  

The contractor deducts the cost of materials from the price for the whole job and calculates the deduction on the difference of 
£300. The contractor has to pay £90 to our accounts office and pays £445 (£535 - £90) to the subcontractor. 

|    |    |    |     |     |     |     |     |
|----|----|----|-----|-----|-----|-----|-----|
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |
|    |    |    |     |     |     |     |     |

Entries on the Contractor's monthly **return** 
In this example, the contractor should enter the following amounts in the appropriate boxes on the Contractor's monthly return: 

 
Total payment 
535 


Direct cost of materials used 235 
 
Amount deducted 
90 

  

  

Example D6 The following is an example of a calculation where materials as well as labour are supplied ('supply and fix'). 

|     |     |     |
|-----|-----|-----|
|     |     |     |
|     |     |     |
|     |     |     |
|     |     |     |
|     |     |     |
|     |     |     |

Where the subcontractor is registered for **VAT,** any VAT they had to pay on materials should be **excluded** in the cost of materials when calculating the CIS deduction. 

|    |    |     |     |     |     |     |       |     |         |
|----|----|-----|-----|-----|-----|-----|-------|-----|---------|
|    |    |     |     |     |     |     |       |     |         |
|    |    |     |     |     |     |     |       |     |         |
|    |    |     |     |     |     |     |       |     |         |

For the total cost of £600 a subcontractor, who is a taxable person for VAT purposes, agrees to paint the interior of a building and to supply the materials. The painter pays £235 for the materials, which includes VAT of £35. 

£ 
 
 
Labour charge 
400 
Materials 
200 
 
Total payment 
600 
 
Add VAT 
105 


Amount due (invoice **amount)** 
705 


Calculation of **deduction** 


Total payment (exclusive of VAT) 
600 


Less cost of materials (exclusive of VAT) 
–200 


Amount liable to deduction 
400 
 
 
Amount deducted at 30% 
–120 


Net payment to **subcontractor** 
585 
 
   

  


The subcontractor is paid £585, which is the invoice amount 
(£705) less the deduction (£120). 

  

Entries on the Contractor's monthly **return** 
In this example, the contractor should enter the following amounts in the appropriate boxes on the Contractor's monthly return: 

 
Total payment 
600 


Direct cost of materials used 200 
 
Amount deducted 
120 


  

  

  
 
Example of a payment and deduction statement to be given to subcontractors paid under deduction: 
- on a payment basis, or 
- monthly, where this is less frequent. 

Example payment and deduction statement 
 
 
Any Contractors Ltd 
 
 
56 High **Street** Anytown 
 
ABC 123 


Contractor's Employer Reference Number: **123/456789** 


Construction Industry **Scheme** 
Statement of payment and deduction for month ending: 
05 April 2013 

## Subcontractor

     

Name Mr A N **Other** 

|              |     |
|--------------|-----|
|              |     |
| Unique       |     |
|              |     |
| Taxpayer     |     |
|              |     |
| Reference    |     |
|              |     |
| 98765        |     |
|              |     |
| 43210        |     |
|              |     |
|              |     |
| Verification |     |
|              |     |
| number*      |     |
|              |     |
| £            |     |
|              |     |
|              |     |
| Gross        |     |
|              |     |
| amount       |     |
|              |     |
| paid         |     |
|              |     |
| (Excl        |     |
|              |     |
| VAT)         |     |
|              |     |
| (A)          |     |
|              |     |
| 5,450.36     |     |
|              |     |
|              |     |
| Less         |     |
|              |     |
| cost         |     |
|              |     |
| of           |     |
|              |     |
| materials    |     |
|              |     |
| 584.72       |     |
|              |     |
|              |     |
| Amount       |     |
|              |     |
| liable       |     |
|              |     |
| to           |     |
|              |     |
| deduction    |     |
|              |     |
| at           |     |
|              |     |
| 20%          |     |
|              |     |
| 4,865.64     |     |
|              |     |
| p            |     |
|              |     |
| Amount       |     |
|              |     |
| deducted     |     |
|              |     |
| (B)          |     |
|              |     |
| 973.12       |     |
|              |     |
|              |     |
|              |     |
| Amount       |     |
|              |     |
| payable      |     |
|              |     |
| (A           |     |
|              |     |
| -            |     |
|              |     |
| B)           |     |
|              |     |
| 4,477.24     |     |
|              |     |


  


* Verification number only to be entered where a deduction at the higher rate has been made. 



Please keep this document **safe** 

## Getting Advice



You can get more detailed advice from our CIS website. 


  
 
 
This booklet together with other information about CIS, is available online at **www.hmrc.gov.uk/cis** 


For advice on Self Assessment you can phone our Self Assessment Helpline on 0845 9000 444 

  


To register as a contractor, please phone our New Employer Helpline on 0845 60 70 143 


Our Advice Teams provide help about CIS over the phone, and give presentations locally. To find out more, go to www.hmrc.gov.uk/bst 

## Your Rights And Obligations

|    |    |    |    |    |    |    |     |     |
|----|----|----|----|----|----|----|-----|-----|
|    |    |    |    |    |    |    |     |     |
|    |    |    |    |    |    |    |     |     |

Your *Charter* explains what you can expect from us and what we can expect from you. For more information go to www.hmrc.gov.uk/charter 

## How We Use Your Information

|    |    |     |       |         |     |     |     |     |
|----|----|-----|-------|---------|-----|-----|-----|-----|
|    |    |     |       |         |     |     |     |     |
|    |    |     |       |         |     |     |     |     |
|    |    |     |       |         |     |     |     |     |
|    |    |     |       |         |     |     |     |     |
|    |    |     |       |         |     |     |     |     |

HM Revenue & Customs is a Data Controller under the  
Data Protection Act 1998. We hold information for the purposes  
specified in our notification to the Information Commissioner,  
including the assessment and collection of tax and duties, the  
payment of benefits and the prevention and detection of crime,  
and may use this information for any of them.  


  
 
   

We may get information about you from others or we may give  
information to them. If we do, it will only be as the law permits, to:  
- check the accuracy of information - prevent or detect crime - protect public funds. 


  

  

We may check information we receive about you with what is already in our records. This can include information provided by you as well as by others such as other government departments or agencies and overseas tax and customs authorities. We will not give information to anyone outside HM Revenue & Customs unless the law permits us to do so. For more information go to www.hmrc.gov.uk and look for Data Protection Act within the Search facility. 

## Index A

Accounts **office** 
Cleaning, **internal** 
58, 68 


payments made to 
36, 37, 44, 72, 
definition of 
58 


73, 75, 76 
 
 
Clients 
6, 19, 50 
 
Agency **workers** 
Close **company** 
rules 
17 
Alterations 
5, 19, 55, 56 


change of control 
47 
definition of 
47 


definition of 
55 
Companies 
examples 
56 
   
 
 
within a group 
13, 23, 50 
 
Appeal 
26, 40 
Construction 


definition of 
18, 19, 52, 55 

## B

Construction **Industry** 
Training Board **(CITB)** 
Buildings 


levy 
18, 27 
 
 
erecting and altering 
11 
Construction 
Businesses 


operations 
18, 19, 49, 52, 54 
foreign 
11, 16 
agencies 
16 
non­construction 
6, 12 
contractors 'deemed' 
11, 12, 13, 15 
non­resident 
41 
contractors mainstream
11, 13­15 
'
' 
C 
Charities 
15 
CIS 
liabilities payable 
9, 37, 42 
Helpline 
13, 17, 19, 
34­36, 49 


reasonable care taken 
to follow rules 
39 


contracts 
18, 19, 33, 
46, 52 
definition of 
18, 52 
excluded 
59­62, 65­71 
expenditure on 
6, 12 
included 
52, 54, 65­71 
managing agents 
50 
payments 
5, 14, 17 
scope of 
5, 52 
subcontractors 
15, 16, 17 
 
CIS132 
10, 37 
Contra 
Cleaning, **external** 
58, 68 
 
definition of 
47 


definition of 
58 
Contracts 


assigned to someone other than 
subcontractor 
45 
between managing agent and 
subcontractor 
50 


contract of employment 
8, 52 
definition of mixed 
53 
wholly outside scope of scheme 
33 


word of mouth or written 
18, 52 
scheme 
17 
standard rate 
18, 23, 25, 26, 45, 72 
statements of 
7, 9, 26, 28­30 
Contractors 

  


35, 39, 45, 48, 51, 78 
waive payment of 
39 
deemed or mainstream 
11­15 
 
Deemed **contractors** 
12­14 
expenditure on own property 
13 
intent 
33, 38 
monthly returns 
31­36 


Demolition 
5, 19, 54, 55, 57 
definition of 
56 


negligence 
33, 38 
pack 
32 


Dismantling 
5, 19, 54, 55 
definition of 
56 
records 
10, 29, 37­40 

## E

|                |     |     |
|----------------|-----|-----|
|                |     |     |
|                |     |     |
|                |     |     |
| responsibility |     |     |
|                |     |     |
| for            |     |     |
|                |     |     |
| running        |     |     |
|                |     |     |
| scheme         |     |     |
|                |     |     |
| following      |     |     |
|                |     |     |
| death          |     |     |
|                |     |     |
| 46             |     |     |
|                |     |     |
| wider          |     |     |
|                |     |     |
| meaning        |     |     |
|                |     |     |
| 6,             |     |     |
|                |     |     |
| 11             |     |     |
|                |     |     |
|                |     |     |
| Credit         |     |     |
|                |     |     |
| or             |     |     |
|                |     |     |
| payment        |     |     |
|                |     |     |
| cards          |     |     |
|                |     |     |
| 48             |     |     |
|                |     |     |
|                |     |     |
|                |     |     |
|                |     |     |
| Employer's     |     |     |
|                |     |     |
| Annual         |     |     |
|                |     |     |
| Return         |     |     |
|                |     |     |
| (P35)          |     |     |
|                |     |     |
| 10,            |     |     |
|                |     |     |
| 37             |     |     |
|                |     |     |
|                |     |     |
|                |     |     |
| Employment     |     |     |
|                |     |     |
| status         |     |     |
|                |     |     |
| 8,             |     |     |
|                |     |     |
| 32,            |     |     |
|                |     |     |
| 39             |     |     |
|                |     |     |
|                |     |     |
| Errors         |     |     |
|                |     |     |
| 33,            |     |     |
|                |     |     |
| 34­36,          |     |     |
|                |     |     |
| 38,            |     |     |
|                |     |     |
| 39             |     |     |
|                |     |     |

## D

Expenses 
 
 
Debt **factor** 
29, 45 
Declaration 


travelling and subsistence 
(includes fuel costs) 
18, 27 


Extension 
13, 54, 55, 57 
definition of 
56 
 
failing to make 
38 
false 
44 
incorrectly making 
38 


Decorating 
5, 19, 54, 
58, 68­70 

## F

Deduction 
Factsheet 
8 


Finance Act **2004** 
18, 19, 52, 63 
Finishing **operations** 
54, 71 
assessment of amount due 
40 
disputes about 
44 
documentary evidence 
of a 
28 
higher rate 
7, 18, 25, 28, 32, 


definition of 
58 
examples 
58, 59 
exceptions 
59 
 
 
Forms 
31 
lost or mislaid 
51 


Fuel costs (see **also** 
travelling **expenses)** 
27 


41­45, 75, 78 
problems with 
39 
repayment of those with 
Double Taxation Agreement (DTA) 
42 
repayment of those 
without Double Taxation 
Agreement (DTA) 
43 

## G

L 
17  
Gangs 
 
 
Labour **agencies/**  
staff **bureaux** 
16  
 
11, 16  
gang­leaders 
 
Labour­only 
72, 75  
Group **companies** 
 
 
50  
definition of 


Land/landowner 
14, 49, 54, 57, 58, 60  
Leaflets 
42  
 
 
(see *also* Factsheet)  

## H

Legislation 
52, 54, 56, 59,  


60, 62, 63  
41  
HMRC Centre for 
Non­Residents 
Liquidators/receivers 
46  
Helplines 
Local **authorities**  
13, 17, 19, 34,  
Construction Industry  
Scheme (CIS)  
as contractors/clients 
6  
35, 36, 49  
as deemed contractors 
12  
34­36  


as subcontractors 
16  


19  
incorrect return  
outside scope of CIS  
M  
I 
 
Maintained **schools** 
15  
 
10  
Identity **check** 
 
Managing **agents**  
Incorrect **information** 
role 
50  


Materials 
39  
negligently or deliberately 
provide 
cost of materials 
5, 7, 14, 15, 18,  
Independent tax **tribunal** 
27­30, 32  


44  
decision after ruling 

  


overstated/excessive  
payment for 
27  
49  
Inducements 
52, 60  
Integral **works** 


58  
definition of 
N  
National **Insurance** contributions 
9, 17, 36, 37, 43  
K 


Class 4 
18, 40  
 
Key **terms** 
11  


Net **payment** 
7, 30, 35, 72­77  
Nominees  
of subcontractor 
45  


45 
registered for gross payment 
|                 |             |     |
|-----------------|-------------|-----|
|                 | Non­resident |     |
|                 |             |     |
| businesses      |             |     |
|                 |             |     |
| 41­43            |             |     |
|                 |             |     |
| Penalties       |             |     |
|                 |             |     |
| 33,             |             |     |
|                 |             |     |
| 38,             |             |     |
|                 |             |     |
| 39,             |             |     |
|                 |             |     |
| 44              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| Non­construction |             |     |
|                 |             |     |
| operations      |             |     |
|                 |             |     |
| 6,              |             |     |
|                 |             |     |
| 19,             |             |     |
|                 |             |     |
| 59              |             |     |
|                 |             |     |
| Permanent       |             |     |
|                 |             |     |
| establishment   |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| meaning         |             |     |
|                 |             |     |
| of              |             |     |
|                 |             |     |
| 42              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| Not             |             |     |
|                 |             |     |
| contractors     |             |     |
|                 |             |     |
| under           |             |     |
|                 |             |     |
| scheme          |             |     |
|                 |             |     |
| 13,             |             |     |
|                 |             |     |
| 65              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| date            |             |     |
|                 |             |     |
| of              |             |     |
|                 |             |     |
| change          |             |     |
|                 |             |     |
| 26              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| Personal        |             |     |
|                 |             |     |
| representatives |             |     |
|                 |             |     |
| payment         |             |     |
|                 |             |     |
| on              |             |     |
|                 |             |     |
| death           |             |     |
|                 |             |     |
| of              |             |     |
|                 |             |     |
| subcontractor   |             |     |
|                 |             |     |
| 46              |             |     |
|                 |             |     |
|                 |             |     |
| O               |             |     |
|                 |             |     |
| Pipeline        |             |     |
|                 |             |     |
| 14,             |             |     |
|                 |             |     |
| 66,             |             |     |
|                 |             |     |
| 68              |             |     |
|                 |             |     |
|                 |             |     |
| Omissions       |             |     |
|                 |             |     |
| 33,             |             |     |
|                 |             |     |
| 38              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| Plant           |             |     |
|                 |             |     |
| 27,             |             |     |
|                 |             |     |
| 28,             |             |     |
|                 |             |     |
| 56,             |             |     |
|                 |             |     |
| 57,             |             |     |
|                 |             |     |
| 59,             |             |     |
|                 |             |     |
| 60,             |             |     |
|                 |             |     |
| 66,             |             |     |
|                 |             |     |
| 67,             |             |     |
|                 |             |     |
| 69              |             |     |
|                 |             |     |
|                 |             |     |
| Optical         |             |     |
|                 |             |     |
| imaging         |             |     |
|                 |             |     |
| systems         |             |     |
|                 |             |     |
| 38              |             |     |
|                 |             |     |
|                 |             |     |
|                 |             |     |
| Preparatory     |             |     |
|                 |             |     |
| works           |             |     |
|                 |             |     |
| 54,             |             |     |
|                 |             |     |
| 58              |             |     |
|                 |             |     |
| Overpayment     |             |     |
|                 |             |     |
| 35              |             |     |
|                 |             |     |
| Private         |             |     |
|                 |             |     |
| Finance         |             |     |
|                 |             |     |
| Initiative      |             |     |
|                 |             |     |
| (PFI)           |             |     |
|                 |             |     |

## P

Pay As You Earn **(PAYE)** 
8, 9, 17,  

  

  


36, 37, 43 
definition of payments made under 
49 
exclusion of payments 
made by a public body 
under 
49 


Painting and **decorating** 
52, 54, 58 


Partnerships 
6, 16, 43, 44, 46, 49 


Private **householders** 
6, 13 
status of 
65 
Payment(s) 
 
 
Profits 
9, 40, 42 
Property 


agricultural 
14 
Property Developer/ 
speculative builder 
11, 61 
balancing payment 
9, 34 
gross 
9, 16, 26, 27, 28, 29, 
30, 32, 38, 44­48, 74, 78 
made to 
subcontractors 
5, 7, 18, 20, 31, 


Public **bodies** 
12, 16, 49 

## R

Records 

  


archived 
38 
contractors 
29, 37, 39 
inspecting 
38 
missing 
39 
 
Reference **number** 
verification 
25 


Refund 
10, 37 
individuals and partnership 
subcontractors wishing 
to claim 
43 
   


32, 36, 48, 72­78 
made under PFI 
49 
making to HMRC 
36, 37, 72, 
73, 75, 76 
net 
7, 30, 35, 72­77 
not within scheme 
32 
quarterly 
37 
record details of 
7, 30 
retention 
48 
small 
15 
statement 
7, 9, 26, 28­30, 
35, 39, 45, 48, 78 
status 
26, 38, 45­47 
to third parties 
45 
under deduction 
10, 18, 23, 26, 27, 
29, 32, 39, 44, 45, 
48, 72, 78 
Statement(s) 
Repairs 
5, 13, 19 


duplicates 
29 
definition of 
56 
information included 
28 
Retention **payments** 
of deduction 
28–30 
 
 
definition of 
48 
of practice 
59 
Returns 
 
 
payment 
26, 29, 35 
by Internet 
31, 33 


Student loan **repayments** 
9, 37 
correcting of errors 
33, 34, 36 


Subcontractors 
electronically and post 
31­33 
incomplete 
38 
action to be taken on 
change of address 
47 
late and incorrect 
38 
agencies as 
16 
monthly 
16, 20, 25­27, 


gang leaders 
11, 16 
31­38, 45­48, 72­77 


invoice 
26, 48, 53 
nil 
33 
nominees 
45 
paper 
31 
payment status 
26, 38, 45­47 
 
Reverse **premiums** 
inducements 
49 
payment under 
deduction 
26, 39, 44, 45 
Ruling 
qualifying conditions 
to be paid gross 
9 


asked for by contractor 
or subcontractor 
44 
re­engagement of 
21, 22 


type of 
24 


Supply and fix 
68, 73, 74, 76, 77 
S 
Systems, **installation** of 
54, 56 
Scheme **representatives** 
50 


definition of 
57 
examples 
57 
contractor as company 
within group 
51 


liability of each 
company within group 
51 
T 
 
School, **maintained** 
15 
Taxation 
   
Self­employed 
6, 8, 16 
Corporation Tax 
10, 37, 40 


Set off **deductions** 
9, 37, 43 
Income Tax 
40 
 
Site **preparation** 
5 
VAT 
18, 27, 29, 56, 


73, 74, 76­78 


Speculative **builder/** 
property **developer** 
11, 61 
 
 
Tax **liability** 
9, 43 
Tax **year** 
10, 20­23, 26, 
 
 
Staff **Bureaux/** 
labour **agencies** 
16 


37, 38, 43 
 
Tenant 
14, 49 
|             |         | Terms   |
|-------------|---------|---------|
|             |         |         |
| of          |         |         |
|             |         |         |
| engagement  |         |         |
|             |         |         |
| 8           |         |         |
|             |         |         |
| Territorial |         |         |
|             |         |         |
| waters      |         |         |
|             |         |         |
| (UK)        |         |         |
|             |         |         |
| 5,          |         |         |
|             |         |         |
| 11,         |         |         |
|             |         |         |
| 16,         |         |         |
|             |         |         |
|             |         |         |
|             |         |         |
|             |         | 19,     |
|             |         |         |
| 63,         |         |         |
|             |         |         |
| 68          |         |         |
|             |         |         |
| Third       |         |         |
|             |         |         |
| parties     |         |         |
|             |         |         |
| 14          |         |         |
|             |         |         |
|             |         |         |
|             | payment |         |
|             |         |         |
| to          |         |         |
|             |         |         |
| 45          |         |         |
|             |         |         |
| Trading     |         |         |
|             |         |         |
| names       |         |         |
|             |         |         |
| legal       |         |         |
|             |         |         |
| status      |         |         |
|             |         |         |
| 44          |         |         |
|             |         |         |
|             |         |         |
|             |         |         |
|             | use     |         |
|             |         |         |
| of          |         |         |
|             |         |         |
| 44          |         |         |
|             |         |         |

## U

|           |     |
|-----------|-----|
|           |     |
|           |     |
| Unique    |     |
|           |     |
| Taxpayer  |     |
|           |     |
| Reference |     |
|           |     |
| (UTR)     |     |
|           |     |
| 23,       |     |
|           |     |
| 24,       |     |
|           |     |
| 28,       |     |
|           |     |
| 32,       |     |
|           |     |
| 44,       |     |
|           |     |
| 46        |     |
|           |     |
|           |     |
| Utility   |     |
|           |     |
| company   |     |
|           |     |
| 14        |     |
|           |     |

## V

|                |     |     |     |
|----------------|-----|-----|-----|
|                |     |     |     |
| VAT            |     |     |     |
|                |     |     |     |
| 18,            |     |     |     |
|                |     |     |     |
| 27,            |     |     |     |
|                |     |     |     |
| 29,            |     |     |     |
|                |     |     |     |
| 56,            |     |     |     |
|                |     |     |     |
| 73,            |     |     |     |
|                |     |     |     |
| 74,            |     |     |     |
|                |     |     |     |
| 76­78           |     |     |     |
|                |     |     |     |
| Verification   |     |     |     |
|                |     |     |     |
|                |     |     |     |
|                |     |     |     |
|                |     |     |     |
| future         |     |     |     |
|                |     |     |     |
| 26             |     |     |     |
|                |     |     |     |
| of             |     |     |     |
|                |     |     |     |
| subcontractors |     |     |     |
|                |     |     |     |
| 20­22,          |     |     |     |
|                |     |     |     |
| 39,            |     |     |     |
|                |     |     |     |
| 46             |     |     |     |
|                |     |     |     |
| process        |     |     |     |
|                |     |     |     |
| 7,             |     |     |     |
|                |     |     |     |
| 20             |     |     |     |
|                |     |     |     |
| reference      |     |     |     |
|                |     |     |     |
| number         |     |     |     |
|                |     |     |     |
| 25,            |     |     |     |
|                |     |     |     |
| 26,            |     |     |     |
|                |     |     |     |
| 28,            |     |     |     |
|                |     |     |     |
| 32,            |     |     |     |
|                |     |     |     |
| 78             |     |     |     |
|                |     |     |     |

## W

|          |     |     |
|----------|-----|-----|
|          |     |     |
|          |     |     |
| Works    |     |     |
|          |     |     |
| forming  |     |     |
|          |     |     |
| part     |     |     |
|          |     |     |
| of       |     |     |
|          |     |     |
| the      |     |     |
|          |     |     |
| land     |     |     |
|          |     |     |
| 54,      |     |     |
|          |     |     |
| 57       |     |     |
|          |     |     |
| examples |     |     |
|          |     |     |
| 57       |     |     |
|          |     |     |
|          |     |     |
|          |     |     |
|          |     |     |

These notes are for guidance only and reflect the position at the time of writing. 

They do not affect any right of appeal. 


  
 
   
 
 
Issued by HM Revenue & Customs January 2013 © Crown copyright 2013