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HMRC internal manual

Construction Industry Scheme Reform Manual

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HM Revenue & Customs
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Monthly returns: overview: deemed contractors - non-contract payments

Introduction

The term contractor, for the purposes of the Construction Industry Scheme, is defined at FA04/s59.

It is set out to include:
 

  • any person carrying on a business which includes construction operations (FA04/s74). These are known as ‘mainstream contractors’ in this guidance.
  • any person carrying on a business, or defined body, whose expenditure on construction operations exceeds certain limits (FA04/s59 (1)(b)-(l)). These are known as ‘deemed contractors’ in this guidance.
  • any subcontractor to a contract for construction operations who engages subcontractors to carry out any of that work (FA04/s57 (2)).

Deemed Contractors

Under the Scheme, some businesses, public bodies and other concerns who regularly carry out or commission construction work, are deemed to be contractors.

Deemed contractors are set out at FA04/s59 (1)(b)-(l) to include the following:
 

  • businesses that spend a certain amount on construction operations
  • public bodies and other defined bodies that spend above a certain amount on construction operations, including:

    • any public office or department of the Crown (including any Northern Ireland department and any part of the Scottish Administration)
    • the Corporate Officer of the House of Lords, the Corporate Officer of the House of Commons and the Scottish Parliamentary Body
    • any local authority
    • any development corporation or new town commission
    • the Commission for the New Towns
    • the Secretary of State if the contract is made by him under Section 89 of the Housing Associations Act 1985
    • the Housing Corporation, a housing association, a housing trust, Scottish Homes and the Northern Ireland Housing Executive
    • any NHS trust or Health and Social Services (HSS) trusts.

The amount any businesses must spend on construction operations, to be considered deemed contractors, is set out at FA04/s59 (1)(l). This is an average, annual, expenditure of £1 million or more for a period of three years ending at the end date of the latest period of account.

Alternatively, where the business did not exist at the beginning of that period of three years, one third of the business’ total expenditure on construction operations for so much of those three years as the business has been in existence must amount to £1 million or more.

The amount the public bodies must spend on construction operations, to be considered deemed contractors, is set out at FA04/s59 (2). This is an average annual expenditure of £1 million or above for a period of three years ending on the preceding 31 March.

Deemed Contractors and monthly returns

Any payments made by a deemed contractor to subcontractors in respect of construction operations undertaken will need to be included in a monthly return in the same way as payments returned by any other mainstream contractor.

However, where a deemed contractor expends monies on property that is used solely for the purposes of the business itself, then the payments made to subcontractors are outside of the scope of the scheme and do not need to be reported on the monthly return. CISR15140 has more information here.