CISR14100 - The Scheme: construction operations: buildings and structures

Section 74(2)(a) Finance Act 2004 states that construction, alteration, repair, extension, demolition or dismantling of buildings or structures (whether permanant or not) including offshore installations are within the scope of the Construction Industry Scheme (CIS).

This provision includes conservatories, green houses and garden sheds if based on a foundation.

Prefabricated structures

FA04/S74 (2)(a) also covers substantial prefabricated structures such as oil rigs and modular elements of oil rigs that are constructed onshore but later towed to their final location at sea. However, the manufacture of building components and their delivery are not construction operations (FA04/S74(3)(c)).

Modern methods of construction (MMC) can include prefabricated components constructed off-site (for example, in a factory), which may be delivered and assembled on site by the same manufacturing company. Examples of these components include, but are not limited to:

  • Doors
  • Stairs/staircase
  • Window walls
  • Wall panels
  • Floor panels
  • Pre-cast concrete foundation walls and slabs
  • Modular wiring: wiring looms (e.g. pre-assembled cabling systems)
  • Timber frames
  • Precast panels
  • Precast foundations
  • Bathrooms (including enclosing/supporting structure)
  • Kitchen (including enclosing/supporting atructure)
  • Room sized components

Whether prefabricated building components are considered construction operations within scope of the CIS, under FA04/S57(2), is dependent on the service being provided and the type of contract which has been agreed.

If the construction activities fall under a ‘mixed contract’ (see CISR14030), where any part of the contract includes or relates to construction operations, then all payments are within the scope of the CIS.

For contracts that fall within the scope of CIS and where payment is to be made to a net paid subcontractor, deductions made under the scheme should only be applied to that part of the payment not representing the direct cost of materials to the subcontractor (FA04/S61 (1)) (see CISR15060). Where modules are built in a factory and purchased as a complete unit, the materials cost would be the total cost of purchase of the completed module not including installation costs. However, where components are not purchased as a unit and they are assembled during the construction operation, the labour costs to assemble the components should not be included in the material costs.

Example 1

When a company has a contract to supply, deliver and install a prefabricated component on-site, it is considered as a ‘mixed contract’ and therefore CIS is applicable. For example, a timber frame structure for a residential home is built off-site in a factory and the modules are delivered and installed by the same company, this means CIS will apply to the entire contract and is a ‘mixed contract’.

Example 2

A company only has a contract to supply and deliver several floor panels and the roof structure to a construction site for commercial purposes, installation is not included in the contract. As the company's obligations under the construction contract will be fulfilled following the delivery of the prefabricated components, they are outside the scope of CIS as the contract does not include installation of the modules. If the contract included installation of the units, then that would bring them under a ‘mixed contract’ and CIS would apply.

Example 3

There are several entities within the same corporate group. A third-party enters into a contract with Company A to build and supply modules and a separate contract with Company B to install the module. Company A will be outside the scope of CIS as there is no installation element within the contract. Company B’s contract will be within the scope of CIS as they are installing the modules. However, if there is a single contract with the third party and Company B to supply, deliver, and install the modules, this contract will be in scope of CIS. It is the installation element of the contract that brings it within the scope of CIS. The intra-group supply of the modules from Company A to Company B, provided the contract does not include installation, would be outside the scope of CIS.

Example 4

A property developer contracts with Company A for the supply and delivery of prefabricated “room sized” components. Installation is carried out by a third party, but under the terms of the contract Company A is required to test/inspect the components following installation. The supply and delivery of the components by Company A and the subsequent testing and inspection are outside the scope of CIS. However, should Company A be required to modify the components once installed this new work would fall within the scope of CIS and the property developer would need to consider the application of the mixed contract rules.

Shipbuilding

Although ships are undoubtedly ‘structures’ they are not structures to which CIS applies. This is because they are vehicles, not civil engineering constructions or static industrial installations. Therefore any operation carried out on a ship including the maintenance, re-fitting or painting / re-painting of a ship will be outside the scope of CIS.

Temporary structures

Although section 74(2)(a) indicates that it applies to temporary buildings and structures, in practice, certain temporary structures are considered to be outside its scope as long as they are only in place for a limited time. These include:

  • exhibition stands
  • film and TV sets
  • theatre sets
  • marquees
  • portable offices (the exclusion does not extend to their use on construction sites - see ‘site facilities’ below)

It is unlikely that exhibition stands and marquees will remain in place for long. Similarly, film, TV and theatre sets are commonly dismantled quite soon after their construction. If the structure in question will not remain in place for more than two months you may accept that its erection is outside the scope of CIS.

Site facilities

Note that the exclusion of temporary structures does not apply to the erection of site huts, portable offices and similar facilities on building sites. Where these are constructed on building sites, they are considered to be integral to the main construction operations and therefore are in scope of CIS.

Site hoardings

These are also treated as integral to the main operations and are therefore within the scope of the Scheme.

Lifts

Lifts are an integral part of the building in which they are installed. Whether installed in new buildings or older buildings being adapted to accommodate them their installation represents a construction operation. This applies also to similar machinery installed in buildings and other locations such as:

  • chair lifts installed in domestic or commercial premises (see below)
  • escalators
  • travelators (moving walkways)
  • baggage-handling equipment (baggage carousels and conveyors)
  • window cleaning hoists

Note, however, that the maintenance and repair of this kind of machinery is outside the scope of the scheme.

Chair lifts and stair lifts

Chair lifts are different from stair lifts. A chair lift will normally rise vertically through a building in order to move the passenger from one level or floor to another. The nature of the plant and equipment involved in a chair lift requires it to be integrally fixed to the fabric of the building, and its installation will be a construction operation to the building or structure. FA04/S74 (2)(a) refers.

Stair lifts utilise the existing stairwell of a building by running a purpose made rail along the profile of the staircase. The rail is simply bolted to the wall and a chair moves along the rail powered by an electric motor connected to a nearby power supply. As the installation of a stair lift can be installed and removed without any significant alteration or repair to the building, the installation and/or repair of stair lifts in isolation will be outside the scope of CIS.