CIS specialist EmphaCIS Tax Consultancy Ltd
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Maintenance and repair service engineer

CIS: When are contractual arrangements caught?


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.

29th Sep 2021
CIS specialist EmphaCIS Tax Consultancy Ltd
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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.

Construction contracts

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).

Maintenance contracts

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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Replies (5)

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By Hugo Fair
29th Sep 2021 16:07

Isn't it time that CIS was put out to grass?
The solution to preventing (or at least reducing) a lack of tax collection in one area should not be to simply move the collection burden onto others - even if that has become HMRC's modus operandi over the years.
All it does is at best to provide a layer of extra admin, which is actively used by some to avoid paying their liabilities - and, as per the article, trips up the law-abiding but unwary along the way.

Thanks (3)
Replying to Hugo Fair:
By johnjenkins
30th Sep 2021 11:31

Where HMRC have tried to create a scenario whereby money is paid to them quicker e.g. IR35, CIS and changing employment status, they have made a huge scaffold pole for their own backs. If they left all alone they would find the coffers filling. I have felt for many years that HMRC should leave the admin to us and just get on with investigation and collection. I was hoping that agent strategy would lead to that but hey ho MTD will sort out all the problems.

Thanks (0)
Replying to Hugo Fair:
Ivor Windybottom
By Ivor Windybottom
01st Oct 2021 09:11

Agree CIS has had its day.

We can only properly fix the problem when cash is out of the picture and all payments are traceable through bank accounts.

It will be a great step towards stopping corruption and fraud when cash is no longer viable.

Thanks (0)
Replying to Ivor Windybottom:
By johnjenkins
01st Oct 2021 09:54

You certainly are talking out of your windybottom. Don't you think people will find a different way of payment other than cash? We've got bitcoin and barter. The biggest fraud are to do with banks and nothing to do with cash. Cash always eventually gets into the real economy where fraud almost certainly doesn't.

Thanks (0)
By jeremyiwhite
01st Oct 2021 15:00


Thanks (0)