Part 3U.K.Income tax, corporation tax and capital gains tax

Chapter 3U.K.Construction industry scheme

IntroductionU.K.

57IntroductionU.K.

(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-contractor (see section 58); and

(b)another party to the contract (“the contractor”) either—

(i)is a sub-contractor under another such contract relating to all or any of the construction operations, or

(ii)is a person to whom section 59 applies.

(3)In sections 60 and 61 “the contractor” has the meaning given by this section.

(4)In this Chapter—

(a)references to registration for gross payment are to registration under section 63(2),

(b)references to registration for payment under deduction are to registration under section 63(3), and

(c)references to registration under section 63 are to registration for gross payment or registration for payment under deduction.

(5)To the extent that any provision of this Chapter would not, apart from this subsection, form part of the Tax Acts, it shall be taken to form part of those Acts.

58Sub-contractorsU.K.

For the purposes of this Chapter a party to a contract relating to construction operations is a sub-contractor if, under the contract—

(a)he is under a duty to the contractor to carry out the operations, or to furnish his own labour (in the case of a company, the labour of employees or officers of the company) or the labour of others in the carrying out of the operations or to arrange for the labour of others to be furnished in the carrying out of the operations; or

(b)he is answerable to the contractor for the carrying out of the operations by others, whether under a contract or under other arrangements made or to be made by him.

59ContractorsU.K.

(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[F1, 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[F2, 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 [F3Homes and Communities Agency];

(g)the Secretary of State if the contract is made by him under section 89 of the Housing Associations Act 1985 (c. 69);

(h)the Housing Corporation, a housing association, a housing trust, Scottish Homes, and the Northern Ireland Housing Executive;

(i)any NHS trust;

(j)any HSS trust;

(k)any such body or person, being a body or person (in addition to those falling within paragraphs (b) to (j)) which has been established for the purpose of carrying out functions conferred on it by or under any enactment, as may be designated as a body or person to which this section applies in regulations made by the Board of Inland Revenue;

(l)a person carrying on a business at any time if—

(i)his average annual expenditure on construction operations in the period of three years ending with the end of the last period of account before that time exceeds £1,000,000, or

(ii)where he was not carrying on the business at the beginning of that period of three years, one-third of his total expenditure on construction operations for the part of that period during which he has been carrying on the business exceeds £1,000,000.

(2)But this section only applies to a body or person falling within subsection (1)(b) to (f) or (h) to (k) if—

(a)in any period of three years, that body or person has had an average annual expenditure on construction operations of more than £1,000,000, and

(b)since the condition in paragraph (a) was last satisfied, there have not been three successive years in each of which the body or person has had expenditure on construction operations of less than £1,000,000.

In this subsection “year” means a year ending with 31st March.

(3)Where section 57(2)(b) begins to apply to a person in any period of account by virtue of his falling within subsection (1)(l), it shall continue to apply to him until he satisfies the Board of Inland Revenue that his expenditure on construction operations has been less than £1,000,000 in each of three successive years beginning in or after that period of account.

(4)Where the whole or part of a trade is transferred by a company (“the transferor”) to another company (“the transferee”) and section 343 of the Taxes Act 1988 has effect in relation to the transfer, then in determining for the purposes of this section the amount of expenditure incurred by the transferee—

(a)the whole or, as the case may be, a proportionate part of any expenditure incurred by the transferor at a time before the transfer is to be treated as if it had been incurred at that time by the transferee; and

(b)where only a part of the trade is transferred, the expenditure is to be apportioned in such manner as appears to the Board of Inland Revenue, or on appeal to the [F4tribunal], to be just and reasonable.

(5)In this section—

• “development corporation” has the same meaning as in—

  (a)

  the New Towns Act 1981 (c. 64), or

  (b)

  the New Towns (Scotland) Act 1968 (c. 16);

• “enactment” includes an enactment comprised in an Act of the Scottish Parliament and a provision comprised in Northern Ireland legislation;

• “housing association” has the same meaning as in—

  (a)

  the Housing Associations Act 1985 (c. 69), or

  (b)

  Part 2 of the Housing (Northern Ireland) Order 1992 (S.I. 1992/ 1725 (N.I. 15));

• “housing trust” has the same meaning as in the Housing Associations Act 1985;

• “HSS trust” means a Health and Social Services trust established under the Health and Personal Social Services (Northern Ireland) Order 1991 (S.I. 1991/194 (N.I. 1));

• “new town commission” has the same meaning as in the New Towns Act (Northern Ireland) 1965 (c. 13 (N.I.));

• “NHS trust” means a National Health Service trust—

  (a)

  established under [F5section 25 of the National Health Service Act 2006 or section 18 of the National Health Service (Wales) Act 2006], or

  (b)

  constituted under section 12A of the National Health Service (Scotland) Act 1978 (c. 29).

(6)In this section references to a body or person include references to an office or department.

(7)The Board of Inland Revenue may make regulations amending this section for the purpose of removing references to bodies which have ceased to exist.

[F6(8)This section is subject to section 73A (designated international organisations: exemption from section 59).]