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HMRC internal manual

Construction Industry Scheme Reform Manual

HM Revenue & Customs
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The Scheme: construction operations: disputes about 'scope'

CISR14600 Action guide contents

Under the Construction Industry Scheme these disputes generally take two forms

  • the subcontractor objects to registering under the Scheme or to a deduction made by a contractor from a payment because they consider that the work done is outside the scope of CIS
  • a contractor from whom deductions in respect of payments made are being sought by HMRC maintains that the work done was outside the scope of CIS

These situations are considered in the following paragraphs.

Subcontractor/Contractor dispute

Remember that the contractor is potentially liable to a penalty if they fail to verify and make a deduction in respect of a payment for construction work that is caught by the Scheme. For this reason the contractor should initially contact NICEO for the final decision on any dispute. Where there is a dispute between the NICEO/subcontractor’s Processing Office and the contractor, you should obtain full details and any documentary evidence of the work carried out before referring to the CIS Technical Team for guidance (see CISR97090).

Settling disputes - written confirmation

In the majority of cases, the question of whether or not a particular operation falls within or outside the Scheme will be relatively straightforward. In all cases you will need to obtain precise details of the work to be carried out. This is essential in the event that you are asked to confirm your decision in writing to either, or both, parties to the contract. When doing so you should always avoid generalisation and ‘To whom it may concern’ type letters and only refer to specific operations carried out by the subcontractor.

That said, disputes may still arise where a subcontractor acknowledges that some work they do is within the scope of the Scheme but claims that a particular contract is outside its scope when payment is made. If such a dispute is referred to you, you should consult the information panel at CISR14050 and follow the action guide at CISR14610.

Contractor/HMRC dispute

Where a contractor is disputing their liability to account for a deduction which it is believed should have been made from subcontract payments, the contractor may contend that there was no such liability because the work involved is not a construction operation.

There is no procedure for laying a dispute between HMRC and the contractor about the scope of the Scheme directly before the Tribunal. Where such a dispute arises you should first try to reach a settlement by agreement. If the contractor continues to deny liability, you should then raise a Regulation 13 determination covering the disputed deduction (for guidance about Regulation 13 determinations, see CISR82000 onwards). The issue of the determination gives the contractor the opportunity to appeal and allows the matter in dispute to either go for an Internal Review, or for a hearing before the Tribunal.

In these circumstances, follow the action guide at CISR14620.