A: Under s 57 FA 2004 certain payments under construction contracts are to be made under deduction of tax. A “construction contract” means a contract relating to construction operations which is not a contract of employment involving a contractor and a sub-contractor.

The Construction Industry Scheme (CIS) applies to operations including the installation in a building or structure of a system of heating, lighting, air-conditioning and so on (s 74(2) FA 2004).

The installation of a new boiler with radiators and piping would constitute a system and be liable to the CIS deduction regime. However, replacing a faulty boiler would not amount to the installation of a system since it is just one component of the whole system. Similarly repairs to an existing system are not within the scope of CIS. Furthermore, the extension of an existing system (such as adding an extra radiator) would not be within the scope of CIS.

So where the plumbing company engages the sub-contractor to replace and / or repair boilers and other components of the central heating system the CIS regime will not apply to the contract. The HMRC manual at CISR14090 clarifies the issues involved.

However, there may be a complication in the situation if some of the work carried out for the property company involves the installation of a system for, say, one of the properties involved rather than merely repairing it or replacing components. The work on that property would then be within the CIS regime. Where there is a mixed contract if part of the work involves construction operations then all of the work is liable to a CIS deduction. It is not possible to split out the CIS work from the rest and invoice separately. The HMRC manual at CISR14030 gives a useful discussion on this point.