In this section:
- Multiple contractor status for larger businesses under CIS
- CIS where construction isn't your main activity
- Public bodies and organisations under CIS
- How CIS applies to businesses based outside of the UK
CIS where construction isn't your main activity
The Construction Industry Scheme (CIS) sets out rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.
Some businesses and other organisations might need to apply the scheme because they spend a large amount of money each year on construction operations. If this is the case, they may be classed as a 'deemed contractor', meaning that they may have to follow the CIS rules for construction contractors.
This guide explains what deemed contractors are and what they need to do under the CIS rules.
On this page:
What is a deemed contractor?
HM Revenue & Customs (HMRC) may treat certain businesses or organisations as contractors under CIS if they spend an average of £1 million or more a year over three years on construction work. These types of contractor are called deemed contractors and can include:
- businesses like property investment companies
- local authorities
- housing associations and trusts
- government departments
- certain other public bodies
If you're a deemed contractor you have to follow the same CIS rules as other 'mainstream' contractors. However, although all of your spending on construction operations counts towards the £1 million, if you are a business which is a deemed contractor (but not a public body), you can make certain payments that are exempt from the normal CIS rules. These are payments for construction work done to property used for the purposes of:
- the business itself
- any company within the same group as your own if your business is a company
- any company in which your company owns 50 per cent or more of the shares
It doesn't matter if third parties like external auditors and security contractors use the property incidentally too - it's still exempt from the normal CIS rules. But payments for construction work on the following types of property aren't exempt:
- property your business lets commercially to third parties
- property that's for sale or to let (unless the sale or let is purely incidental to your business)
- investment property
Find out about CIS deemed contractors' obligations
Stopping being a deemed contractor
You'll remain a deemed contractor for as long as your spending on construction work amounts to an average of £1 million or more a year.
To stop being a deemed contractor, you'll need to show HMRC that your business or organisation has spent less than £1 million a year on construction operations for three years in a row. If HMRC is satisfied that this is the case, they'll deregister you as a deemed contractor.
If your spending on construction work is only ever going to be payments that are exempt from the normal CIS rules because they're for work done to property used for your business, you can ask HMRC to deregister you - even if you spend £1 million or more a year. If they agree - and you're sure that you won't be making any payments within the scheme in the near future - then they'll deregister you. Once you're deregistered, it's your responsibility to tell HMRC if you make any payments for construction work that would bring you back into CIS as a contractor.
Making your monthly contractor returns under CIS
Find out about paying your subcontractors under CIS
