You are a subcontractor on money in and a contractor on money out, with both sets of duties running at once — and the £3 million rolling test can make a contractor of a business that is not construction at all.
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Find out moreThe thing that makes a builder's CIS position heavier than a single-trade business is that both sets of duties run simultaneously. On the payments you receive from a main contractor you are a subcontractor: you suffer a deduction unless you hold gross payment status. On the payments you make to your own labour you are a contractor: you must verify before the first payment, deduct at the right rate from the right base, file a return by the 19th, issue statements in the same fourteen days, and pay the deductions over by the 22nd.
Neither set of duties reduces the other. What they do interact on is cash: the CIS you deduct from your own subcontractors is one of the four things a company can offset its own suffered deductions against, alongside PAYE, National Insurance and student loan repayments.
Almost everything a builder or groundworks contractor does. Construction, alteration, repair, extension, demolition and dismantling of buildings or structures — whether permanent or not. Works to the land: roads, power lines, drainage, water mains, wells, sewers, coast protection. And the operations that are integral to, preparatory to, or for rendering complete the works: site clearance, earth-moving, excavation, tunnelling and boring, foundations, scaffolding, site restoration, landscaping, and roadways and access works.
CIS 340 additionally confirms as in scope the assembly of prefabricated units on site, building alterations to accommodate lifts, hoists and conveyors, fence and concrete post installation, asbestos removal, land draining, and the provision of labour for construction operations.
What is out: mineral extraction and the underground works for it; the manufacture of building or engineering components, materials, plant or machinery, and their delivery to site; and the professional work of architects, surveyors, or consultants in building, engineering or landscaping.
Whether a job is a construction operation decides two things at once, not one. It decides whether the payment is inside CIS — and because the VAT domestic reverse charge takes its scope from the CIS definition, it decides the VAT treatment on the same invoice. Get the scope question wrong and you get both wrong together.
A business that is not itself construction becomes a contractor where expenditure on construction operations exceeds £3,000,000 in the period of one year ending with that time. It is a rolling twelve-month test, and it has applied in that form since 6 April 2021. A developer, or a business running a large fit-out programme, can cross it without ever having thought of itself as a contractor.
Constructing a building designed as a dwelling is zero-rated, in the course of construction and before completion, by a person with "person constructing" status. Four conditions have to hold for "designed as a dwelling": self-contained living accommodation; no direct internal access to any other dwelling; construction in accordance with statutory planning consent; and no prohibition on separate use or disposal.
That last one is the trap. An annexe that cannot be sold or let separately fails it and is standard rated. Materials supplied with zero-rated or reduced-rated work take the same rate as the services — but the builders' block keeps fitted furniture, carpets and separately hired plant or scaffolding standard rated regardless.
Work gets 5% where the number of single household dwellings changes, where premises never previously used residentially (or not for ten years or more) are converted, or where a dwelling empty for two years or more is renovated. Everything else on an existing occupied dwelling — including extensions — is 20%.
If you are paid under CIS, the deductions taken during the year are set against your tax bill and any excess is repaid. The CIS refund estimator gives a rough figure, how much is a CIS tax refund covers what decides it, and what you can claim lists the costs that count. Earlier years can still be claimed within the time limits, and a limited company recovers its deductions through the payroll instead. Keep every payment and deduction statement, because they are the evidence for the claim.
If you are VAT registered, the domestic reverse charge decides whether you charge VAT to a main contractor, and the reverse charge checker works through a single invoice. It also changes whether the Flat Rate Scheme is worth keeping.
Our fees are a fixed monthly amount agreed before we start, with payroll and CIS returns priced separately. For the books, FreeAgent is included with an eligible Mettle business account: see bookkeeping software for trades.
For money to buy a van or plant, or to cover the wait while a contractor pays, Buzz Financial Services runs a funding search for construction firms across a panel of lenders.
Both, and both sets of duties run at once. You are a subcontractor on the payments you receive from a main contractor and a contractor on the payments you make to your own labour. So you suffer deductions on money in, and you must verify, deduct, return and pay over on money out. Most builders of any size are in exactly this position, and it is why the administration feels heavier than the turnover justifies. It also doubles your exposure to the April 2026 anti-fraud rules, because you now have a labour chain of your own to know about.
If your construction spend is large enough, yes — as a deemed contractor. A business that is not itself construction becomes a contractor where expenditure on construction operations exceeds £3,000,000 in the period of one year ending with that time. It is a rolling twelve-month test. It has applied in that form since 6 April 2021, when it replaced a three-year averaging test. A developer or a business doing a large fit-out programme can cross it without thinking of itself as a contractor at all.
Yes. Section 74(2) covers operations integral to, preparatory to, or for rendering complete the construction works — site clearance, earth-moving, excavation, tunnelling and boring, foundations, scaffolding, site restoration, landscaping and the provision of roadways and other access works. Works to the land are also covered in their own right: roads, power lines, drainage, water mains, sewers and coast protection among others. What is not covered is the professional work of architects, surveyors or consultants in building, engineering or landscaping, which section 74(3) takes out by name.
“Designed as a dwelling” has four conditions. The accommodation must be self-contained, there must be no direct internal access to any other dwelling, construction must be in accordance with statutory planning consent, and there must be no prohibition on separate use or disposal. An annexe that cannot be sold or let separately fails that fourth condition, so it is standard rated even though it looks like a new dwelling.
We act for trade businesses everywhere in the UK and work with you remotely, so your postcode does not decide whether we can help. Your CIS and VAT position does not change when you cross a border either — but the building safety rules and the levy do, which is what the area pages cover.
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