CISR12060 - The Scheme: contractors: businesses becoming / de-registering as ‘deemed’ contractors
Source: gov.uk (2025-12-09)


Strictly, deemed contractor status applies to a business as soon as the necessary conditions apply (CISR12050 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12050)).

A ‘deemed contractor’ is any business who at a given point in time, satisfies the condition in FA04/S59(1)(l) that in the period of one year ending with that time, the person’s expenditure on construction operations exceeds £3 million.

Please see CISR12055 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12055) for more information on applying the test for deemed contractor status.

Registering as a contractor within the CIS is advised as early as possible in order to comply with CIS obligations. To register as a contractor, you need to follow the process at www.gov.uk/register-employer (https://www.gov.uk/register-employer).

However, some deemed contractors will only discover that they have deemed contractor status after the event. Furthermore, a business needs time to set up the systems necessary to apply the CIS.

A complex business with numerous branches and many small contracts may require several months to get organised. Even a small business may require a certain period of grace to make the necessary arrangements.

In certain circumstances, HMRC may issue a notice to exempt the contractor from the requirement to operate the scheme in relation to specified contract payments or payments in a specified period. The period must not exceed 90 days before the date of the notice, but may be extended by one or more further notices (FA04/S61(5)).

Public bodies

Special arrangements apply to setting up new public bodies to operate CIS. Consult the separate information panels listed below for these

Local Authorities:

CISR12090 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12090)

Government departments and agencies:

CISR12110 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12110)

NHS trusts:

CISR12120 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12120)

For more details including the strict definition of 'deemed contractors' you should refer to CISR12050 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12050) and (FA04/s59 (3)).

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Businesses seeking to de-register as contractors

A business that previously met the deemed contractor criteria may de-register from CIS if their construction spend falls below the £3 million threshold in the previous rolling 12-month period and the business does not expect to reach the threshold again in the foreseeable future.

If a business that becomes a deemed contractor because it spends an average of £3million or more on construction operations has registered with the scheme (see CISR12050 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr12050)) but expects it will only be making payments for construction operations that are exempt under SI2005/2045 Part 4 (see CISR15140 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr15140) and CISR17230 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr17230)) the business may deregister from the scheme.

It is important to note that it is the payment and not the business that is exempted by SI2005/2045 Part 4. Where businesses defined by FA04/s59(1)(l) are allowed to effectively ‘de-register’ from CIS, this is on the clear understanding that:
- Any payments it makes under a contract relating to construction operations will always relate to property used for the purposes of the business, or other exempt expenditure and
- The payments will not relate to payments for construction operations to property that the business intends to sell, let or hold as an investment
The deemed contractor test requires businesses to continually assess their construction expenditure, and businesses must decide whether they are likely to meet the conditions and make contract payments again in the future.

Example

An investment company has a large portfolio of properties, and has carried out repairs to which, leading up to June 2025 has reached the £3 million deemed contractor threshold. The company expects that it will continue to make payments for construction operations over the next 6 months. As the property is held as an investment, Reg 22 does not apply as the property is not used for the purpose of the business.

The deemed contractor must continue to be registered and operate the scheme until:
- the expenditure on construction operations falls below the £3 million threshold in the previous rolling 12-month period and no further construction expenditure by the business is expected to be undertaken which would exceed the £3 million threshold or
- it does not expect to make any future payments for construction operations, or
- all future payments will be exempt.
Deemed contractors that have expenditure on construction operations above the threshold, sometimes within CIS, and sometimes exempted by Part 4, should continue to operate within the scheme. Where this is the case either nil returns filed or periods of inactivity should be used (see below) as appropriate. This can also be used if construction work may cease for short periods of time. If you wish to de-register from the CIS you will need to contact the CIS Helpline on xx-xxxx-xxxx.

Setting a period of temporary inactivity

On their monthly return the business can indicate that they do not anticipate making any construction payments for a period of up to six months. At the end of this period the business will need to file a monthly return and if they are still in the same position should once again indicate that they do not anticipate making construction payments for a further period of up to six months. This process can then continue until such time as a payment within the Scheme is made by the business or they de-register completely.

If a business has set a period of inactivity but during that period makes a contract payment, and therefore needs to submit a return, the business can file a return. Filing a return automatically lifts the period of inactivity. If they do not expect further payments to be made, contractors can set a further period of inactivity by ticking the box in the return.

If a deemed contractor would like to set a period of inactivity that is longer than six months they can contact the CIS Helpline on xx-xxxx-xxxx and provide details of when they expect the period of inactivity to last.