It is all too easy for landlords and tenants not to realise that
their deal can fall foul of the Construction Industry Scheme (CIS)
requiring contractors to withhold tax from sub-contractors,
designed to make sure that sub-contractors income tax is paid.
How does this happen? – A landlord can be deemed
to be a contractor when they spend over an average of
£1,000,000 a year for three consecutive years on construction
What constitutes a construction operation? – This
is quite wide and includes all usual construction works and even
painting and decorating etc.
What are the implications for landlords and tenants?
– Where an agreement for lease provides for the tenant
to carry out works at the landlord's cost, the arrangement
could fall within the CIS if the landlord is a contractor (e.g.
because of its history of spending money on construction
operations). In those circumstances, the tenant would be a
sub-contractor for the purposes of the CIS. For the tenant to
receive its money gross the parties need to comply with the CIS,
and we have written a longer client alert on this which you can
read by following
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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