CISR14030 - The Scheme: construction operations: unusual contracts
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There are some unusual contracts that can include, or fall to be treated as, construction operations and are therefore caught by the Scheme.
Some types of unusual contracts are dealt with below.
Call off contracts
Put simply, this represents a firm commitment by a contractor to purchase goods or services from a subcontractor over a period of time.
A ‘Call’ or an ‘Order’ off this type of contract will not be a contract in its own right. Before you can decide whether a payment is caught by the Scheme you will need to know what specific operations can be contracted for in the ‘Call Off’ contract.
‘Call Off’ contracts are sometimes confused with framework or enabling agreements. In a framework agreement, a rate for services might be agreed, but there is no firm contract until a purchase order is placed. Such orders are generally called ‘Spot’ contracts. A framework agreement will have no contractual commitment to purchase goods or services and it is that which sets it apart from a ‘Call Off’ contract. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
Mixed contracts
There are other types of contracts that are mixed. They include items that are caught by the Scheme and others that are not. If any part of a mixed contract includes construction operations, or more strictly ‘relates to’ construction operations, then all payments under that contract are caught by the Scheme, even those payments that are wholly for non-construction work at the point that they are made.
Invoice splitting
Some subcontractors may try to circumvent the Scheme by splitting the invoices between the construction and the non-construction element. For example, an electrical subcontractor might have a contract for rewiring and the installation of a burglar alarm system. The former operation is caught by the Scheme and the latter is not. If both operations are part of the same contract all of the payment will be caught by the Scheme, even where the subcontractor issues separate invoices for the work carried out. In deciding whether a payment is caught by the Scheme it is important to look to the contract and not the payment in the first instance. Payments that are not for construction operations will still fall within the Scheme if construction operations form part of the overall contract. It is important therefore to determine also whether the payment stands alone or is merely one in series of instalments or other payment arrangements for a larger contract.
Excluded payments
Payments for the works listed as excluded in this chapter are only outside the Scheme if contracted for in isolation. The list of works treated as construction operations in this chapter is intended to help you to identify contracts that ‘relate to’ construction operations and not to provide a definitive answer as to whether a payment for that work falls within the scheme. You will need to look at the contract as a whole to make that decision.
(This content has been withheld because of exemptions in the Freedom of Information Act 2000)