Does system installation fall under CIS?by
Whether the installation of equipment or ‘a system’ falls under the construction industry scheme (CIS) is the source of some confusion. Anil Patel answers readers’ questions on this point.
Unfortunately, the CIS legislation is so widely drawn that interpretation of what is caught by CIS and what isn’t can differ.
There are some works which clearly fall within CIS but there are also various other types of works where the position is not as clear as one would like, or instances where the works would be outside of CIS but then can be dragged into CIS because of something else.
It is important to note, that the question of what is within scope and what is outside scope has not fundamentally changed since CIS first came into being during the early 1970s.
The place to start is the legislation in relation to what is within the meaning of construction operations. The legislation is found at s74(2) FA2004 and there are six subsections: (a) to (f). For the purposes of this article, I will focus on subsection (c) which states:
“...installation in any building or structure of systems of heating, lighting, air-conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection.”
It is clear from the wording that it is only the “installation” of these types of “systems” that are caught for the purposes of CIS and as such, the repair, alteration or extension of these systems, in the first instance, will be outside the scope of CIS (but see comments below).
What is a system?
When it comes to CIS, a system can be different things.
First consider whether the item that is being installed is a system in itself or a part of a wider system. For example, an uninterruptible power supply (UPS) unit will be regarded a system in itself and the installation of the same will be within CIS as it will be within the meaning of “installation… of systems of… power supply” given that its purpose is to provide backup power.
The installation (or replacement) of a central heating boiler would not be within CIS (but see below in relation to repairs etc and remedial works). This is because the UPS is standalone, whereas the boiler is a part of a wider system of heating.
As such, any type of plant that provides, or can provide power, will be within the scope of the CIS. This will include the supply of gas (mains or liquified) and/or electricity be that mains or battery (eg a UPS), irrespective of what the power might be used for.
Repairs, alteration or extension
Whilst legislation only captures the installation of these systems and not the repair, alteration or extension of the same, undertaking repairs etc can, nevertheless, be dragged into CIS.
Repairs or alteration
Where the repair or alternation of the system involves other remedial works or making good of the structure in which the system sits, the remedial works or making good will be within CIS as this will be caught under subsection s74(a) FA2004 which captures repairs to structures. As a consequence, if the repairs are undertaken and remedial works or making good is also undertaken under the same contract, then the repairs will be dragged into CIS.
As a consequence, whilst a central heating boiler is not regarded a system in itself but rather a part of a wider system of heating and therefore outside the scope of CIS, the installation can, nevertheless, be dragged into CIS where other remedial works are required to the structure to enable the installation.
As with the repairs or alteration of a system, where remedial works or any making good of the structure is required where a system is being extended (eg the addition of an extra plug socket), then that extension work will be caught for CIS purposes.
Equally, where the ring main is being extended to a newly built extension, then where that work is being done under the same contract the extension of the ring main will be caught for CIS, given that the building works relating to the newly built extension will be within CIS.
Deciding whether or not any particular types of specific works are caught for CIS purposes is not straight forward. What needs to be considered, in the first instance, is whether the plant or equipment being installed is a system in itself or a part of a wider system and what other ancillary works are being undertaken with regard to its installation, repair, alteration or extension.
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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...