There is a possibility that registration would be required under the “deemed contractor” rules.
The legislation is contained at Section 59(1) (b) to (l) Finance Act 2004 (FA2004). This brings into the scope of CIS any businesses which spend over a certain amount on construction operations. (For that matter it also includes certain public bodies and other specified bodies).
The amount that must be spent to warrant inclusion in CIS is £3,000,000 in any rolling 12-month period. This level is effective from 6th April 2021. Prior to that the law required an average of £1,000,000 taken over a 3-year period or, where the period was shorter than 3 years, one third of the total construction expenditure in that period must have exceeded £1,000,000. The change in legislation was subject to transitional arrangements. This retained businesses already caught under the old provisions under the scheme within the scheme until the new conditions cease to be met.
There are certain exceptions to the above rules contained in Statutory Instrument 2005/2045 regulation 22 where the properties are used for the business itself. For example, the construction of a factory costing more than £3,000,000 and used as a factory for the business. This also applies to any company in the same group or any company where 50% or more of the shares are held by the company.
The types of property included in this exemption are:
- offices
- warehouses
- nursing homes
- leased property used by the business’s group, including property leased by one company to another within the same group
- any other facilities used for the business.
Incidental use of the property by third parties does not invalidate the exemption.
It should also be noted that the exemption does not apply to public offices and local authorities.
Useful examples are provided by HMRC at CISR15140.
Regulation 22 tells us the property is not exempt if it is held for sale or to let.
Thus, in the question asked, the crucial decider will be the amount spent (subject to transition) if in excess of £3,000,000 in a rolling 12-month period, then registration for and operation of the CIS scheme is mandatory.
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