A payment is anything paid out by the contractor, for example,
cash, cheque or credit. An advance, a 'sub' or a loan is a credit
and therefore a payment. This applies whether or not the payment is
made directly to the subcontractor.
Where a payment is made to someone other than the
subcontractor you should refer to the detailed guidance at
CISR15050 onwards. Guidance on this is
also available in paragraphs 6.9 to 6.12 of the booklet CIS340 -
'Construction Industry Scheme. Guide for contractors and
subcontractors'.
A 'payment' under the Scheme does not include the cost of materials, VAT, or an amount in respect of the Construction Industry Training Board (CITB) levy. Where a payment is made under deduction, and depending on the terms of the contract, the deduction should also apply to payments for subsistence and/or travelling expenses.
The term deduction means the amount that a contractor has to withhold, where appropriate, from a payment made to a subcontractor, on account of the subcontractor's tax and class 4 NICs liability, or other, usually PAYE liabilities, where the subcontractor is a company. The deduction may be at the standard rate of 20% or at the 'un-matched' subcontractor rate of 30% depending on the circumstances, as described in the following paragraphs.
There are two rates of deduction depending on whether or not the subcontractor can be matched during the verification process by the contractor who is making the payment.
A contract means any legally binding agreement or arrangement
and is usually constituted through the process of 'offer',
'acceptance' and 'communication of acceptance' all of which may be
achieved by word of mouth as well as in a written document.
There is a standard form of contract for labour-only
subcontractors drawn up by the Joint Contracts Tribunal (JCT) for
the construction industry.
The term 'construction operations' is defined in FA04/S74, which
is reproduced in Appendix B of the booklet CIS340 - 'Construction
Industry Scheme. Guide for contractors and subcontractors'.
As a general guide, the term construction operations covers
almost anything that is done to a permanent or temporary building,
structure, work or civil engineering or installation in the United
Kingdom or within its territorial waters (up to the 12 mile limit)
including
Anything done on a construction site in connection with
construction work and under contract to the owner, client, main
contractor or a subcontractor is likely to be a construction
operation. The exceptions are types of work that are clearly not
construction work, such as the running of site facilities such as
canteens, hostels, offices, toilets and medical centres.
The table shown at Appendix C in the booklet CIS340 -
'Construction Industry Scheme. Guide for contractors and
subcontractors', is a list of construction operations and shows
which types of construction work are within the scheme and which
are not. The list cannot include every possible construction job.
Remember that where a single contract relates to a mixture of
jobs, all payments due under the contract are within the scheme,
even if only one of the jobs is within the meaning of construction
operations.
If there is any doubt as to whether a particular type of work
is to be treated as coming within the scope of the Scheme, the
contractor or subcontractor concerned should initially contact the
CIS Helpline for advice.
More detailed guidance can be found in the section dedicated to 'Construction Operations' at CISR14000 onwards.
