Replies (6)
Please login or register to join the discussion.
To elaborate on PNL's absolutely accurate answer
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• self-employed 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'. ContractorA 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. EDIT - Just realised the OP was Nick who knows this already I suspect, and is looking for an exemption. I'll leave it on in case it crops up again.
"Developers" and CIS
If the "developer" is acquiring properties and selling them after refurbishment then within CIS.
If however the "developer" is not really a property delevopler as I understand it, but rather a landlord buying propertues doing them up then letting them out I see that as outside the scope of CIS (subject to the "deemed contractor" £.p limit rules).
In summary define "developer" - ordinarily I'd expect it to be within CIS, but if "developer" means buying properties with no specific intention of selling them after refurbishment then not within CIS (subject to deemed contractor rules).
Vat issues may force CIS status
You are correct that I had a very strong suspicion that there was no exemption other than the £1m construction operations - however I was interested in DMG's take on it as the case in question is where the client is acquiring property as BTL but with a firm & clear intention to demolish and rebuild - I suspect there are a quite few small developers who are not registered but probably should be
If retaining to let post rebuild then suspect CIS is least of his worries, I would concentrate on the vat issues!!
Certainly property rental repairs fall outwith CIS (I have a letter somewhere from HMRC from years ago confirming this approach, irrespective of "quantum") but I have always dealt with construction/conversion to thereafter let as falling within CIS, my thought process being that there were in effect two steps, the build of the unit(s) and then their transfer to the letting business.(notwithstanding the site might be treated as a fixed assets from day 1 and no actual transfer took place) However I suspect my approach is possibly a better safe than sorry one re CIS, where there is no intention to resell there is quite possibly a strong argument that "development" has not taken place.
But looking at what is happening re vat recovery, and possibly considering a need to switch ownership post building to allow full input recovery, it may be that your client may need to sell pre letting which will itself move stage A squarely into CIS territory anyway.