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HMRC internal manual

International Manual

Double Taxation applications and claims: Applicants/claimants: Construction Industry Scheme: Background

Specialist Personal Tax, PT International is responsible for operating the rules of the Construction Industry Scheme so far as they apply to companies that are not resident in the UK. Sub-contractors that are not companies are dealt with in the tax office that is responsible for the area in which the building site or construction project is located.

The Construction Industry Scheme is a statutory scheme that applies to payments made by contractors to subcontractors for construction operations carried out in the UK.

The Scheme is explained in detail in separate instructions - see the Construction Industry Scheme Reform Manual at CISR11010 onwards. Businesses involved in construction operations to which the Scheme applies are either contractors or subcontractors. They can be public bodies, companies, partnerships or self-employed individuals.

The Construction Industry Scheme does not apply to payments for construction work done outside the UK, even if the businesses involved are resident in the UK.

A contractor can be any business that includes construction operations. Contractors include, amongst others

  • construction businesses
  • property developers erecting and altering buildings in order to make a profit
  • foreign businesses that carry out construction operations in the UK (or within UK territorial waters)
  • Government Departments and local authorities that spend on average more than £1 million a year on construction operations
  • non-construction businesses that spend more than £1 million a year on construction operations.

However, non-construction industry businesses that spend less than an average of £1 million a year on construction work are not contractors and they do not have to operate the Scheme.

A subcontractor is any business, whether an organisation or an individual, that has agreed to carry out construction operations for a contractor, either by doing the operations itself or by arranging for them to be done by others.

The Scheme applies to any non-resident contractor that makes payments for construction work carried out in the UK or any non-resident subcontractor being paid for carrying out construction work in the UK. There is no difference between the treatment of UK contractors and subcontractors and non-resident contractors and subcontractors.