CIS: When are contractual arrangements caught?by
Whether certain contractual arrangements are caught for construction industry scheme (CIS) purposes can lead to confusion and potentially non-compliance. Anil Patel answers your questions on this point.
The question of whether or not CIS applies and who is responsible for operating CIS will be determined by:
- Whether or not the contract is within the meaning of a construction contract; and
- the parties to the contract.
Whilst the CIS will be in point depending on whether or not the contract falls within the meaning of a construction contract, CIS need only be operated at the point of payment.
A construction contract is defined as any contract (whether written or verbal) which relates to construction operations and where one party is a contractor (FA 2004 s 59) and the other party is a subcontractor (FA 2004 s 58).
The key part of the legislation is the word ‘relates’. A contract only needs to relate to works/services that fall within the meaning of construction operations for that contract to be within CIS. This would be the case even if those works/services are not actually undertaken.
Where a contract is in place under which various types of works are to be undertaken, some of which would be outside CIS (eg fixing a leaking pipe) and some of which would be inside CIS (eg painting and decorating), then all of the works undertaken or services provided under that contract will be within CIS. This is because painting and decoration is within the meaning of construction operations and as such, the contract relates to construction operations (even if the painting and decorating is never undertaken but could be).
There are various types of contracts under which maintenance services can be provide, for example facilities management contracts or planned, preventive maintenance (PPM) contracts etc. These types of contracts can cover all manner of works, some of which might be within CIS and some outside.
As a consequence, it is vitally important to understand what types of works could be undertaken under this type of contract and having considered the position, if any part of those works would be within the meaning of construction operation, then all of the works or services provided under that contract will be within CIS.
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Anil has over 35 years of experience assisting clients with employment tax and Construction Industry Scheme matters having worked as an employer compliance officer within HMRC, a manager within KPMG and an associate director within Grant Thornton. Anil now operates an independent consultancy, EmphaCIS Tax Consultancy Ltd, supporting clients of...