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HMRC internal manual

Construction Industry Scheme Reform Manual

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HM Revenue & Customs
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The Scheme: contract payments: travel, subsistence and accommodation

CISR15600 Action guide contents
   

Where a construction contract places an obligation upon a contractor to pay a subcontractor’s expenses (such as travel, subsistence and accommodation expenses) such payments form part of the overall value of the contract, by virtue of FA04/s60. As such they will result in a deduction under the Scheme, by virtue of FA04/s61.

An obligation upon a contractor, under a construction contract, to pay a subcontractor’s expenses will fall within FA04/s60 regardless of whether the obligation is written, verbal, express or implied.

A payment made in respect of a subcontractor’s expenses will fall within FA04/s60 regardless of whether the contractor pays or reimburses the subcontractor, pays their expenses directly or pays a nominated third party.

The total amount deducted by the contractor should reflect the gross amount of the payments due under the contract, including the payment of expenses on the subcontractor’s behalf.  (See examples 1 & 2 below).

A deduction will not be due where a contractor allows the subcontractor to use the contractor’s own facilities - such as vehicles or accommodation. A deduction will not be due, even if the contractor is paying a third-party for the facilities, provided these payments are genuinely independent of the construction contract. (See examples 3 & 4 below). However, such arrangements will not be common and may imply the existence of an employer/employee relationship (subject to PAYE) rather than a contractor/subcontractor relationship (subject to CIS). Where a contractor makes a payment to a supplier in respect of a subcontractor’s travel, subsistence or accommodation it is very likely that this is a contract payment and that a deduction is due.

If the contractor can show that the provision of any accommodation was arranged and paid for prior to them entering into a contract with the subcontractor, then payment for that accommodation will be outside CIS.

Example 1

The value of a construction contract is £10,000, including the payment of the subcontractor’s accommodation expenses. The subcontractor’s hotel accommodation costs £1,000. The contractor pays £1,000 directly to the hotel, leaving £9,000 due to the subcontractor. The contractor should make a CIS deduction at the appropriate rate - 20% in this example. The deduction will be £2,000, based on total payments of £10,000. The contractor should give the subcontractor a Payment and Deduction Statement showing a gross payment of £10,000, with deductions of £2,000 for CIS and £1,000 for accommodation. The subcontractor will receive £7,000.

Example 2

The value of a construction contract is £10,000, including the payment of the subcontractor’s fuel costs. The fuel costs come to £2,000, which the subcontractor pays by credit card. The contractor pays £2,000 directly to the subcontractor’s credit card provider. This leaves £8,000 due to the subcontractor. The contractor should make a CIS deduction at the appropriate rate - 20% in this example. The deduction will be £2,000, based on a total payment of £10,000. The contractor should give the subcontractor a Payment and Deduction Statement showing a gross payment of £10,000, with deductions of £2,000 for CIS and £2,000 for fuel. The subcontractor will receives £6,000.

Example 3

The value of a construction contract is £9,000.  The contractor allows the subcontractor to use accommodation rented by them. The value of the subcontractor’s accommodation is £1,000. The contractor has rented the property completely independently of the construction contract.  The payment of rent does not result in a deduction and does not have to go onto the subcontractor’s Payment and Deduction Statement. The contractor should make a CIS deduction at the appropriate rate - 20% in this example. This will be £1,800, based upon a total payment of £9,000. The contractor should give the subcontractor a Payment and Deduction Statement showing a gross payment of £9,000, with deductions of £1,800 for CIS. The subcontractor will receive £7,200.

Example 4

The value of a construction contract is £9,000.  The contractor invites the subcontractor to use hotel accommodation pre-booked by them prior to the contractor entering into the construction contract with the subcontractor. The value of the subcontractor’s accommodation is £1,000. The contractor has pre-booked the accommodation completely independently of the construction contract.  The payment for the accommodation, in these circumstances, does not result in a deduction and does not have to go onto the subcontractor’s Payment and Deduction Statement. The contractor should make a CIS deduction at the appropriate rate - 20% in this example. This will be £1,800, based upon a total payment of £9,000. The contractor should give the subcontractor a Payment and Deduction Statement showing a gross payment of £9,000, with deductions of £1,800 for CIS. The subcontractor will receive £7,200.