Construction Industry Scheme Rules Have Been Simplified For Contractors

The Construction Industry Scheme (CIS) was set up to deal with the payment of tax, focussing on the labour side of construction operations, within the construction industry. A construction project typically has a client or a developer instructing works, a contractor who agrees to undertake the works, and tiers of sub-contractors, perhaps even sub-sub-contractors. CIS sets out a framework for tax deduction at source, to tackle tax evasion and the black economy, not uncommon to this industry.

The terminology within this CIS framework can often be confusing. A 'contractor' (the entity making payments under a construction contract) is defined in the Finance Act 2004 (s.59). It can include any person carrying on a business which includes construction operations, or can even include entities by reference to their average annual expenditure on construction operations. Therefore, the word 'contractor' can have a very wide meaning, and it would be prudent for organisations