What is the Construction Industry Scheme?
The scheme applies mainly to contractors and subcontractors in mainstream construction work, however businesses or organisations whose core activity isn't construction but have a high annual spend on construction may also count as contractors and fall under the scheme.
Deciding whether your work comes within CIS
The Construction Industry Scheme (CIS) is a set of special rules for handling payments made by contractors to subcontractors for construction work. If your business works in the construction industry or does construction related work then it may need to register with HM Revenue & Customs (HMRC) as either a contractor or a subcontractor under CIS.
Certain other businesses and organisations may need to register with HMRC as contractors if they spend more than a certain amount each year on 'construction operations' covered by the scheme. They may have to do this even if their main activity is nothing to do with construction.
Types of work and business structures covered by CIS
CIS can apply to all types of businesses that work in the construction industry in the UK. These include:
- self-employed individuals working as sole traders
- partnerships
- companies
- limited liability partnerships (LLPs)
As well as traditional construction businesses like builders, the scheme can also apply to businesses like:
- labour agencies and staff bureaux
- gangmasters - or gang leaders
- property developers
Even if your business or organisation doesn't do building work, it might still be a mainstream contractor or HMRC may treat it as a 'deemed contractor' - and require it to register with CIS - if it spends more than an average of £1 million a year on construction operations over a three year period.
The types of businesses and organisations that this could apply to include:
- some large businesses
- housing associations
- other 'arms length' management organisations (ALMOs)
- local authorities
- government departments
- other public bodies
Are you a contractor or subcontractor under CIS?
When are you a contractor under CIS?
Under the rules of CIS, you're a contractor if:
- you run a business that engages subcontractors for construction operations - a 'mainstream' contractor
- you run a business that spends an average of £1 million or more a year over a three year period on construction operations - a 'deemed' contractor
- Any type of business, including a company, partnership or self-employed individual, can be a CIS contractor.
Other organisations, like local authorities, can also become contractors if they spend £1 million or more a year on construction work. But if you're a private householder you're not a contractor, no matter how much you spend.
The CIS rules set out in detail the types of work that are construction operations covered by the scheme. As a general guide, almost any type of work that you do to a permanent or temporary building or structure - or to a civil engineering work or installation - is covered by CIS.
When are you a subcontractor under CIS?
CIS uses its own special definition of the term subcontractor. So even if you don't normally think of yourself as a subcontractor, you could be treated as one under CIS.
Under the rules of CIS, you're a subcontractor if you agree to do construction work for a contractor. It doesn't matter how you actually carry out the work - you could do it yourself, get your employees to do it, use your own subcontractors or make some other arrangement.
Subcontractors can be self-employed individuals, any type of business, or other bodies and organisations. Some examples of construction industry subcontractors include:
- sole traders, partnerships and companies that do construction work for contractors
- labour agencies and staff bureaux that use their own workers to do construction work for a contractor - or that supply (but not just introduce) workers to a contractor
- gang leaders who contract to do work for a contractor and are paid for the work done by their gang
foreign businesses paid to do construction work in the UK, or in UK territorial waters - local authorities and public bodies that do construction work for someone else
The Construction Industry Scheme (CIS) sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry.
