VATREVCON28000 - Scope of the construction reverse charge: Payments that do not come under CIS
Source: gov.uk (2025-04-02)


Certain supplies of construction services do not come under the CIS and by extension do not fall under the construction reverse charge. Examples include:
- Expenditure by certain businesses on their own property – ‘own-build’: Under SI 2005/2045 reg 22 (https://www.legislation.gov.uk/uksi/2005/2045/regulation/22/made), businesses who are deemed contractors because they spend an average of more than £3 million on construction operations do not need to apply the CIS (and therefore the reverse charge) to expenditure that relates to property used for the purposes of the business itself, or the purposes of other companies within the same group or any company of which 50% or more of the shares are owned by the company. This exemption does not apply if the property is for sale or let (except where purely incidental), or is held as an investment by the business. More information can be found at CISR15140 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr15140).
- Inducements, including reverse premiums: Under SI 2005/2045 reg 20 (https://www.legislation.gov.uk/uksi/2005/2045/regulation/20/made#:~:text=20.,paragraph%201%20of%20that%20Schedule).), inducements offered by landlords or developers to prospective tenants, or as a result of a lease re-gear, to take up an interest in land do not fall under the CIS (and therefore the reverse charge). This could take the form of a rent-free period, or a contribution towards tenant’s works on the costs of fitting out the property. Specific examples can be found at CISR14045 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr14045). More information on reverse premiums can be found at VATSC05863 (https://www.gov.uk/hmrc-internal-manuals/vat-supply-and-consideration/vatsc05863).
- Certain payments made by a landlord to a tenant in connection with a lease: Under SI 2024/308 reg 20A (https://www.legislation.gov.uk/uksi/2024/308/made), certain payments under a construction contract made by or on behalf of the landlord, to a tenant or prospective tenant of the landlord do not come under the CIS (and therefore are excluded from the reverse charge). This applies to payments for construction operations agreed in connection with a lease where the tenant carries out the construction operations itself or contracts a third party to do so. The works carried out must be intended primarily for the benefit and use of the tenant. More information can be found at CISR14048 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr14048). This provision came into force on 6 April 2024; such payments made prior to this came under the CIS but were excluded from the reverse charge under SI 2019/892 art. 8 (2)(b)(ii) (https://www.legislation.gov.uk/uksi/2019/892/article/8) on the basis that the landlord and tenant have a relevant interest in the same land (subject to a written notification of end user status being issued).
Supplies to businesses who are not required to report payments through the CIS are not subject to the construction reverse charge.