What counts as construction
work under CIS.
HMRC's included list is wider than most firms assume, and its excluded list catches out the trades that read it. The mixed contract rule decides more real cases than either.
Published ·Updated ·9 min read·Written by Darshan Parmar, Founder
CIS covers construction operations carried out in the UK, as defined in section 74 of the Finance Act 2004. That means building, altering, repairing and demolishing buildings and structures, works forming part of the land, installing building systems, painting and decorating, and the preparatory and finishing work around them. Some operations are excluded when supplied on their own. Where one contract covers both, every payment under it falls within the scheme.
A mixed contract is caught in full
Most guides to CIS scope give two lists and stop there. The rule that decides more real cases than either list is the one about contracts that contain both.
Where any part of a contract relates to construction operations, every payment under that contract is caught. That includes payments made wholly for non-construction work. HMRC sets this out at CISR14030 in its CIS manual, and adds that the contract, not the payment, is where to look first.
So the exclusion list is less useful than it looks. A firm finds its activity there and concludes it is outside CIS. The question is not what task is being done. It is what the contract covers.
The exclusions apply to operations supplied on their own. Bundled into a contract that also covers included work, they come in with it.
This bites hardest on the firms this site is written for. A maintenance contract with a works element. An M&E package covering design and installation. An FM contract covering routine cleaning and repairs to the building fabric. Each has a part that would be excluded on its own, and each contract is caught in full.
What counts as construction work under CIS
Section 74(2) of the Finance Act 2004 lists the included operations. In summary:
- Construction, alteration, repair, extension, demolition and dismantling of buildings and structures, permanent or temporary, including offshore installations.
- Works forming part of the land: roads, railways, docks, pipelines, reservoirs, water mains, sewers, power lines, communications masts and cable networks, industrial plant, and coastal and drainage works.
- Installation in a building or structure of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply and fire protection systems.
- Internal cleaning of buildings and structures in the course of construction, alteration, repair, extension or restoration.
- Painting and decorating internal or external surfaces.
- Preparatory, integral and finishing work: site clearance, earth-moving, excavation, tunnelling and boring, foundations, scaffolding, site restoration, landscaping, and roadways and access works.
HMRC reads the finishing category widely. Screeding, tiling, fitted kitchens and bathrooms, shopfitting, insulation and floor coverings other than carpet are all inside when they form part of a construction project. So are asbestos removal, formwork, traffic management and plant hired with an operator.
Two inclusions regularly surprise firms. Erecting scaffolding is inside, which catches firms who think of it as hire. Demolition is inside, which catches firms who think the scheme is only about putting things up.
What is excluded from CIS, when supplied on its own
The qualifier in that heading matters, given the mixed contract rule. Section 74(3) excludes:
- Drilling for or extracting oil or natural gas, and extracting minerals, including tunnelling or boring for that purpose.
- Manufacturing building components, materials, plant or machinery, including components for building systems, and delivering them to site. Installing them is inside.
- Professional work of architects, surveyors and consultants in building, engineering, decoration or landscape.
- Making, installing and repairing artistic works, such as sculptures and murals, that are wholly artistic in nature.
- Signwriting, and erecting, installing and repairing signboards and advertisements.
- Installing seating, blinds and shutters.
- Installing security systems, including burglar alarms, closed circuit television and public address systems.
HMRC's guidance puts several more activities outside: carpet fitting, delivering materials, hiring plant or scaffolding without an operator, and running site facilities such as a canteen or temporary offices. The professional work exclusion is the one most often misapplied. A designer who only designs is outside. A firm that designs and installs under one contract has a mixed contract, and none of it comes out.
Repairs to building systems sit outside
The second trap runs the other way, and it catches M&E and FM firms in particular. The Act includes the installation of heating, lighting, ventilation, power, drainage, water and fire protection systems. HMRC reads that literally, at CISR14090.
Repairs to those systems are outside the scheme. Soldering a leaking pipe, replacing a tap or a fan motor, rewiring a single circuit and fixing a radiator are all repairs. So is replacing a central heating boiler. Extending a system, such as adding radiators or sockets, is outside too.
Replacing a whole system is installation, so a full rewire is inside. A repair contract that also requires making good to the building fabric is a mixed contract, caught in full. Repairs to the building itself, its roof and its walls, are inside because repair of a building is a named operation.
Is it covered by CIS? Activity by activity
These are the activities contractors ask about most, with HMRC's treatment of each. Every row assumes the activity is the whole of the contract. Put it in a contract with included work and the mixed contract rule takes over.
| Activity | Under CIS | Why |
|---|---|---|
| Sprinklers, fireproof cladding, and automatic door and shutter closers | Inside | Structural fire protection, installed as a system of fire protection. |
| Fire alarms and detection that only sound a warning | Outside | HMRC treats these like security systems. Detection that also triggers doors, shutters or sprinklers is inside. |
| Repairs to heating, plumbing, electrics or ventilation | Outside | Only installation of a system is named. A boiler replacement counts as a repair. |
| Replacing a whole building system, such as a full rewire | Inside | Replacing the entire system is installation. |
| Repairs to the building fabric | Inside | Repair of a building or structure is a named operation, new build or not. |
| Fitted kitchens, bathrooms and shopfitting | Inside | Fixed furniture installed in a building is finishing work. HMRC gives supply and fit of a kitchen as its own example of a caught contract. |
| Screeding, tiling, vinyl and laminate | Inside, as part of construction | Finishing work. Vinyl and other floor coverings fitted where no construction is under way are outside. |
| Carpet fitting | Outside | Excluded even when the carpet is in the building specification. Fitted under one contract with other flooring, it is caught. |
| Off-site fabrication and delivery | Outside | Manufacture and delivery are excluded. Fabricate and install under one contract and the whole contract is caught. |
| Steel erection and welding on site | Inside | Constructing or altering a structure. Welding inspection on its own is outside, as professional work. |
| Groundworks and directional drilling | Inside | Excavation, boring and pipelines are works forming part of the land. The drilling exclusion covers oil, gas and minerals only. |
| Landscaping | Inside, as part of a project | Finishing work, including walls, drives and patios. Routine gardening and tree surgery outside a wider project are outside. |
| Plant hire | Inside with an operator | Hire with an operator is an integral operation. Hire without one is outside, including scaffolding hire with no labour. |
| Commissioning | Depends on the duty | Inspecting, adjusting and reporting is outside, as survey work. A duty to make good defects in the installation brings it inside. |
| Inspection and testing | Outside | Professional work, including soil and environmental testing. Site supervision and clerk of works roles are inside. |
| Burglar alarms, CCTV, door entry and PA systems | Outside | Named security exclusions. Gates, barriers, automatic bollards and security fencing are inside. |
| Data and telephone networks inside a building | Outside | Excluded in isolation. External cable networks, masts and telephone poles are works forming part of the land, and inside. |
| Lifts, hoists, tanks, silos and generators | Inside to install | Plant built into the building or the land. Repairing machinery inside a building is outside. |
| Cleaning | Inside during construction | Internal cleaning during or on completion of works is named. External cleaning and routine office cleaning are outside. |
| Work on ships and vessels | Outside | HMRC lists ship maintenance, refitting and painting as outside. Offshore installations are named in the Act, and inside. |
Notice how many rows turn on the contract rather than on the trade. That is the pattern, and it is why "is my trade in CIS" is usually the wrong question.
Who has to operate CIS
Scope is one half. The other is whether the business paying is a contractor for CIS purposes, and businesses outside construction are caught more often than they expect.
A mainstream contractor is a business that pays subcontractors for construction operations. Builders, property developers, labour agencies and gangmasters all qualify.
A deemed contractor is a business that does not do construction work but spends more than £3 million on construction operations in any rolling 12 months. From then on it operates the scheme on that spend: verify each subcontractor, deduct, and file monthly. Property investors, retailers, manufacturers and housing associations regularly cross that line.
Three exceptions come up often:
- A householder paying for work on their own home is not a contractor, so the payment is outside the scheme.
- Work paid for by a charity or trust, or by the governing body of a maintained school on behalf of the local education authority, is outside.
- A deemed contractor does not operate the scheme on work to property used for its own business, unless that property is for sale or rent. The spend still counts towards the £3 million threshold.
The same scope decides the VAT domestic reverse charge, which applies to supplies of construction services within CIS. A contract misjudged for CIS can be invoiced wrongly for VAT as well.
How to decide for your own contracts
Three questions, in this order.
- What does the contract cover as a whole? Not the task in front of you. If any part relates to an included operation, treat every payment under it as within the scheme.
- Is the payer a contractor for CIS purposes? A construction business paying subcontractors always is. Any other business is once its construction spend passes £3 million in 12 months.
- Does anything genuinely stand alone? A separate contract for an excluded operation is outside. A line item inside a bigger contract is not a separate contract, and splitting the invoice changes nothing.
Where a contract is genuinely borderline, the cost of getting it wrong is lopsided. Failing to operate the scheme leaves the contractor liable for the deductions it should have made. Operating it unnecessarily costs some administration, and the subcontractor reclaims the deduction. HMRC will also give a view on a specific contract when asked.
Scope is a judgment about a contract, made by the firm and its accountant. The record's job is to hold the contract and its payments together, so the judgment is applied consistently and can be evidenced afterwards. In Unibuild's subcontractor management, subcontract orders print their terms on page one. Payments are recorded against the approved invoice with the remittance attached, and the subcontract exposure report totals orders, invoices and payments across the ledger. For a firm running both maintenance and works, each order shows what it covers rather than leaving it to an invoice description months later. Because Unibuild is bespoke software, an order can carry whatever details the firm's own contracts need.
Where to start, on Monday
Take the three contracts you are least sure about and ask one question of each: does any part of it relate to an included operation? Not the invoice, not the task, the contract.
Then split the maintenance work. Repairs to the building fabric are inside. Repairs to building systems are outside, unless the same contract also covers work that is inside.
Finally, check whether the business is a deemed contractor. If construction is not your main activity but building spend has passed £3 million in a year, put it to your accountant before HMRC puts it to you. The liability for deductions not made sits with the payer.
Sources
Checked against the source rather than against commentary. Where a schedule, a rate or a threshold is definitive on a government site, read it there.
- Construction Industry Scheme GOV.UK
- Finance Act 2004, section 74: meaning of construction operations legislation.gov.uk
- Who is covered by CIS GOV.UK
- CISR14030: mixed contracts GOV.UK
- CISR14090: building service systems GOV.UK
- CISR14160: fire protection systems GOV.UK
- CISR14170: floor coverings GOV.UK
- CISR14240: preparatory, integral and finishing operations GOV.UK
- CISR14260: plant hire GOV.UK
- CISR14270: professional work GOV.UK
- CISR14290: security systems GOV.UK
- CISR14070: territorial limits GOV.UK
- CISR12050: deemed contractors GOV.UK
- CISR14330: index of construction operations GOV.UK
Questions about CIS scope.
The scheme itself is set out in the CIS deductions guide.
What work is covered by CIS?
What is excluded from CIS?
Where is the full list of construction operations defined?
Who is covered by CIS in the UK?
What is a deemed contractor?
Does CIS apply to work for a private homeowner?
Does CIS apply to work outside the UK?
Is repair and maintenance work covered by CIS?
Is a boiler replacement or heating system replacement covered by CIS?
Is installation of a sprinkler system covered by CIS?
Are fire alarms covered by CIS?
Is scaffolding covered by CIS?
Is plant hire covered by CIS?
Does landscaping come under CIS?
Are groundworks and directional drilling within the scope of CIS?
Is off-site fabrication covered by CIS?
If a kitchen is supplied and installed under a single contract, is it within CIS?
Is latex screeding or floor preparation within CIS?
Do inspection, testing and commissioning count as construction operations under CIS?
Are security systems, gates and barriers covered by CIS?
Is data cabling or IT network installation covered by CIS?
What happens if a contract covers both included and excluded work?
See what each order actually covers.
Mixed contracts are where this goes wrong. One order covering both included and excluded work is a decision somebody has to make, and record.
- Thirty minutes, weekdays, from tomorrow.
- Nothing to prepare. Bring a job number and we mock that job up.
- You drive it. There is no slide deck.
- You keep what you saw as a 14-day trial. No card.
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CIS monthly returns, the date and the penaltiesThe nineteenth, every month, whether or not you paid anybody. What the penalty ladder actually looks like, and the declaration on the return that carries more weight than the figures.Read it →All 7 articles on tax and CIS.