The CIS and foreign builders

The CIS applies in respect of any construction operations which are undertaken within the UK or its territorial waters (S 74, FA 2004), and it is the type of work, rather than who undertakes it, which triggers the need to operate the scheme. The scheme must therefore be operated by all contractors and sub-contractors if they are carrying out construction operations in the UK, even if they are not UK resident themselves.

Work carried out on land owned by the person to whom payment is made (Regulation 19)

This seemed a rather tortuous situation to envisage until I looked at the illustration in the book. I could see that it could easily happen without anyone thinking about operating CIS.

HMRC can authorise mainstream contactors to operate the CIS in respect of certain payments of up to £1,000 (excluding the cost of materials), and in this case, where the contractor makes payment to a person for work which that person has carried out on this own property.

A contractor digs a trench through a farmerís land to lay a pipeline, but due to time pressures, the contractor offers the farmer £1,000 to back-fill the land himself. Given that the person making the payment is a mainstream contractor, the farmer is a sub-contractor under a contract relating to a construction operation. Consequently, the contractor should operate the CIS in respect of the payment. However, if the contractor obtains prior authorisation from HMRC not to operate the CIS, the payment of £1,000 can be made outside the CIS.

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The CIS and foreign builders
The CIS and foreign builders
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