Who is a contractor under the construction industry scheme?
Answered 17 March 2026
Who is a Contractor Under the Construction Industry Scheme?
What the law says
The term "contractor" is defined in FA 2004, ss. 57 and 59.
Under s. 57(2), a "construction contract" is one where the contractor either:
- is itself a sub-contractor under another contract relating to all or any of the same construction operations; or
- is a person to whom s. 59 applies.
Section 59(1) sets out the full list of bodies and persons who are contractors. It applies to:
| Category | Description |
|---|---|
| (a) | Any person carrying on a business which includes construction operations (mainstream contractors) |
| (b) | Any public office or department of the Crown (including Northern Ireland departments, the Welsh Assembly Government and any part of the Scottish Administration) |
| (c) | The Corporate Officer of the House of Lords, the Corporate Officer of the House of Commons, the Scottish Parliamentary Corporate Body and the National Assembly for Wales Commission |
| (d) | Any local authority |
| (e) | Any development corporation or new town commission |
| (f) | The Homes and Communities Agency |
| (fa) | The Greater London Authority in the exercise of its housing, regeneration or new towns/urban development functions |
| (g) | The Secretary of State where the contract is made under s. 89 of the Housing Associations Act 1985 |
| (h) | The Regulator of Social Housing, a housing association, a housing trust, Scottish Homes, and the Northern Ireland Housing Executive |
| (i) | Any NHS trust |
| (j) | Any HSS trust |
| (k) | Any body designated by regulations as one established to carry out functions conferred by or under any enactment |
| (l) | A person carrying on a business at any time if, in the period of one year ending with that time, the person's expenditure on construction operations exceeds £3,000,000 (deemed contractors) |
Important qualification: s. 59(2) provides that the bodies in paragraphs (b) to (fa) and (h) to (k) only qualify as contractors if their expenditure on construction operations also exceeds £3,000,000 in the preceding year.
HMRC guidance / practice
HMRC distinguishes between two types of contractor:
- Mainstream contractors (FA04/s.59(1)(a)): any person carrying on a business which routinely includes construction operations.
- Deemed contractors (FA04/s.59(1)(b)–(l)): bodies or persons whose expenditure on construction operations exceeds the threshold, even if construction is not their core business.
HMRC guidance gives the following practical examples of each:
- Mainstream: construction businesses, property developers erecting/altering buildings for profit, foreign businesses carrying out construction operations in the UK.
- Deemed: Government Departments, local authorities, and non-construction businesses spending more than £1 million a year on average on construction operations.
Non-construction businesses spending less than an average of £1 million a year on construction work are not contractors and do not have to operate the Scheme.
Typical deemed contractors include large manufacturing concerns, department stores, breweries, banks, oil companies, property investors, and businesses in utilities, telecommunications, and transport network infrastructure.
For the deemed contractor threshold, HMRC applies a rolling 12-month test. Expenditure is calculated excluding VAT and excluding the cost of materials.
Citation sources
Part 3 Income tax, corporation tax and capital gains tax Chapter 3 Construction industry scheme Introduction Introduction 57 1 This Chapter provides for certain payments (see section 60) under construction contracts to be made under deduction of sums on account of tax (see sections 61 and 62). 2 In this Chapter “ construction contract ” means a contract relating to construction operations (see section 74) which is not a contract of employment but where— a one party to the contract is a sub-contr
The term contractor, for the purposes of the Construction Industry Scheme, is defined at FA04/s57 and s59. It is set out to include any subcontractor to a contract for construction operations who engages subcontractors to carry out any of that work (FA04/s57 (2)). any person carrying on a business which includes construction operations (FA04/s59 (1)(a)). These are known as ‘mainstream contractors’ in this guidance. any person carrying on a business, or certain bodies, whose expenditure on constr
Part 3 Income tax, corporation tax and capital gains tax Chapter 3 Construction industry scheme Introduction Contractors 59 1 This section applies to the following bodies or persons— a any person carrying on a business which includes construction operations; b any public office or department of the Crown (including any Northern Ireland department , the Welsh Assembly Government and any part of the Scottish Administration); c the Corporate Officer of the House of Lords, the Corporate Officer of t
Where a business is not already a mainstream contractor via the provisions at section 59(1)(a) Finance Act 2004 (see CISR12040), then that business may instead be a “deemed contractor” if it satisfies the construction expenditure threshold tests contained within FA04 S59(1)(l). This page concentrates on applying that test. A ‘deemed contractor’ is any business who at a given point in time, satisfies the condition in FA04/S59(1)(l) that in the period of one year ending with that time, the person’
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Specialist Personal Tax, PT International is responsible for operating the rules of the Construction Industry Scheme so far as they apply to companies that are not resident in the UK. Sub-contractors that are not companies are dealt with in the tax office that is responsible for the area in which the building site or construction project is located. The Construction Industry Scheme is a statutory scheme that applies to payments made by contractors to subcontractors for construction operations ca