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HMRC internal manual

Construction Industry Scheme Reform Manual

The Scheme: payments: VAT


CISR15600 Action guide contents


Where the payment made to the subcontractor is subject to VAT (that is, where the subcontractor is a taxable person for VAT purposes and the payment is in respect of a taxable supply) the amount from which the deduction is made is the payment exclusive of VAT. The subcontractor’s gross payment recorded on the monthly return should be the amount due before VAT is added.

Where a payment made to a subcontractor only entitled to payment under deduction, and whois a taxable person for VAT purposes, includes an element representing the cost of materials, the amount which may be excluded from the payment before deduction is made isthe VAT- exclusive cost of materials.

On the other hand, where the subcontractor is not registered for VAT, any VAT they had to pay in purchasing any materials used in the contract may be included in the cost of materials when calculating the amount of the deduction.

From I June 1984, VAT is chargeable on all building and civil engineering work except:

  • the construction of completely new buildings, and
  • alterations to ‘protected buildings’.