CISR15080 - The Scheme: payments: travel, subsistence and accommodation

Payments by a contractor to, or on behalf of, a subcontractor for travel expenses, petrol for travelling, accommodation costs or subsistence, or in reimbursement of any of these expenses, made under a contract for construction operations or under any other separate contract are subject to a deduction under the Scheme as being part of the overall cost of the labour. This is so by virtue of FA04/s60(8).

Where the contractor is under an obligation to reimburse the subcontractor's expenses and makes direct payments to the supplier, for example, to a hotel, this is a payment on behalf of the subcontractor to which FA04/s61 applies. The deductions from the subcontractor's payments should reflect the gross amount of the payment due under the contract, including what was paid on their behalf, see the examples below which illustrate this;

Example 1

The total construction contract (including the subcontractor’s accommodation costs) is for £10,000 and the accommodation costs £1,000. The contractor pays £1,000 direct to a hotel leaving £9,000 due to the subcontractor. The contractor should make a CIS deduction of £2,000 based on a total payment of £10,000 and should give the subcontractor a PDS showing a gross payment of £10,000, with CIS deductions of £2,000, less a further £1,000 for the accommodation so the subcontractor actually receives £7,000 in his hand.

Example 2

The total construction contract (including van hire and fuel costs) is for £10,000, van hire was £1,000 and the fuel cost came to £2,000. The contractor pays £1,000 direct to the van hire company, and £2,000 to the company credit card provider for the fuel costs, leaving £7,000 due to the subcontractor. The contractor should make a CIS deduction of £2,000 based on a total payment of £10,000 and should give the subcontractor a PDS showing a gross payment of £10,000, with CIS deductions of £2,000, less a further deduction of £3,000 for the van hire and fuel so the subcontractor actually receives £5,000 in his hand.

Example 3

The total construction contract (including fuel costs) is for £10,000 and the fuel cost came to £2,000. The contractor pays £2,000 to the company credit card provider for the fuel costs, leaving £8,000 due to the subcontractor. The contractor should make a CIS deduction of £2,000 based on a total payment of £10,000 and should give the subcontractor a PDS showing a gross payment of £10,000, with CIS deductions of £2,000 and a further deduction of £2,000 for the fuel so the subcontractor actually receives £6,000 in his hand. The contractor later asks the subcontractor for full reimbursement of the fuel costs that the contractor has borne on behalf of the subcontractor and receives a payment of £2,000 from the subcontractor. It would be helpful here for the Contractor to then issue a revised PDS to the subcontractor, but not essential as the old PDS shows the correct gross payment and CIS deductions.