Fabricating in the shop and delivering to site is expressly excluded from CIS. Erecting on site is expressly included. Same steel, same business, two regimes — and the contract decides which, not what is on the lorry.
Steel & fabrication · CIS scope
Section 74(3) excludes the manufacture of building or engineering components or equipment, materials, plant or machinery, and the delivery of any of these to site. That is fabrication. Section 74(2) includes the construction of buildings and structures, and CIS 340 confirms the assembly of prefabricated units on site as in scope. That is erection.
So a business that fabricates and erects operates across the boundary continuously, and which side a payment falls on is decided by what the contract is for — not by the physical activity.
A supply-and-erect contract is a construction operation. A fabricate-and-deliver contract, with the main contractor's own erectors putting it up, is not. Where a single contract covers both, the treatment follows the contract, and it is worth settling in writing before the first invoice rather than after somebody queries the deduction.
The domestic reverse charge takes its scope from the CIS definition. So a fabrication and delivery supply is outside CIS and outside the reverse charge, carrying normal VAT. An erection supply to a VAT and CIS registered contractor who has not notified end-user status is inside both. The same business issues both kinds of invoice in the same week.
Where the payment is within the scheme, the cost of manufacture or prefabrication is expressly one of the items excluded from the payment subject to deduction. For a fabricator that is usually the single largest exclusion available — and it is regularly left unclaimed, because the invoice shows one figure for supply and erect.
The deduction is charged on the payment less materials you directly incurred, consumable stores, fuel other than fuel for travelling, plant hire, the cost of manufacture or prefabrication, and the VAT you charged. Travel and subsistence stay in. And where the contractor buys the materials and recharges them, you have not directly incurred them, so no reduction is due at all.
If the deduction is costing you cash, gross payment status is the fix rather than a workaround — the turnover test is £30,000 of relevant payments net of VAT and materials for a sole trader, and the compliance test, which since 6 April 2024 includes VAT, is the part that needs preparing for.
Then the contract is for construction operations and the whole payment is generally within the scheme — but the cost of manufacture or prefabrication comes out of the payment subject to deduction, so identify it. That exclusion exists precisely for this situation and it is frequently missed because the invoice shows a single figure. Materials you directly incurred come out on the same principle, so a fabricate-and-erect invoice with the steel and the fabrication identified can have a materially smaller deduction base than the contract value.
Welding as part of constructing, altering or repairing a building or structure is part of that construction operation. Fabrication welding in a workshop, producing components for delivery, is within the manufacture exclusion. As everywhere in this scheme, the question is what the contract is for rather than what the activity looks like. That is also why a site welding contract and a workshop fabrication contract for the same customer can sit on opposite sides of the scheme in the same month.
Normally, yes — because it is outside CIS scope, it is outside the domestic reverse charge as well. The reverse charge only applies where the payment must be reported under the CIS regulations. So a delivery-only supply carries normal VAT while an erection supply to the same customer may be reverse charged. Getting that wrong produces an error on both sides of the invoice, because the customer's return mirrors yours. Establish in the contract whether you are selling fabrication and delivery or fabrication and erection, because that one sentence decides both the CIS and the VAT treatment.
Yes. The Annual Investment Allowance gives 100% on up to £1 million of plant and machinery for sole traders, partnerships and companies. Companies can also use full expensing — 100%, uncapped, on new and unused main-rate plant. From 1 January 2026 a 40% first-year allowance is available to unincorporated businesses too. The main-rate writing-down allowance fell from 18% to 14% from April 2026. Full expensing requires the asset to be new and unused, and neither it nor the 40% allowance is available on a car — which now includes most double-cab pick-ups.
Three months of statements or returns, and a straight account of what is wrong and what it is costing.
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