Yes. A property developer or speculative builder is a mainstream contractor under the Construction Industry Scheme from its first payment to a subcontractor, with no spending threshold, because its business includes construction operations. A private householder having work done on their own home is outside the scheme, and a property investor only comes in once its construction spending passes £3 million a year or it starts developing.

Why is a property developer a contractor?

Section 59(1)(a) of the Finance Act 2004 makes a contractor of “any person carrying on a business which includes construction operations”. HMRC’s manual at CISR12040 lists property developers and speculative builders erecting and altering buildings to make a profit among the mainstream contractors, and says these businesses must operate CIS whatever the level of their expenditure on construction. CISR12080 explains why: a developer’s business activity is the creation of new buildings, or the renovation or conversion of existing ones, which is construction even if the developer employs no tradespeople of its own. GOV.UK’s list of mainstream contractors names builders, labour agencies, gang leaders and property developers.

The test looks at the business, not the size of the project. There is no £3 million test, no minimum number of units and no exemption for a developer that uses only one main contractor. That contrasts with deemed contractors, businesses outside construction that only come into the scheme once their spending on construction passes £3 million in a rolling year.

Why are private householders outside the scheme?

CIS only applies to a “construction contract”, which section 57(2) defines as a contract for construction operations where the paying party is either a subcontractor under another contract or a person within section 59. A homeowner paying a builder to extend, repair or even build their own house is not carrying on a business, so is not within section 59(1)(a). CISR12030 confirms that householders having work done on their own homes, including new house building, decoration, repairs or an extension, are not contractors. The builder they pay does not suffer a CIS deduction on that job.

The exclusion depends on the work being for the person’s own home rather than a business. Someone who builds houses to sell, or converts a building into flats for profit, is carrying on a business that includes construction, even if it is their first project. Whether a single project amounts to a trade for income tax is decided by the badges of trade, discussed in property developer or investor; HMRC’s CIS guidance treats speculative building and conversion for profit as development.

What about landlords and property investors?

CISR12080 distinguishes a property investment business, which buys and holds buildings for rent or capital growth, from a developer. Routine refurbishment and maintenance of a rental portfolio, including works such as a new roof, fire systems or building regulations work before letting, are normal investor activities. They bring the investor into CIS only as a deemed contractor once spending exceeds £3 million in a rolling 12 month period.

The position changes when the investor builds something new or redevelops a property in a way that changes its use. HMRC’s examples include redeveloping an old hotel or offices into flats, and converting a dilapidated building into flats to let. That part of the activity is property development and brings the business within CIS immediately as a mainstream contractor, even if the project is small relative to the rest of the portfolio and even though the flats will be let rather than sold. If the business later reverts to pure investment, it returns to deemed contractor rules and may consider deregistering if spending will stay below £3 million. CISR12080 adds that a business claiming to be an investor that develops regularly and substantially is likely to be a developer.

Which payments does a developer have to put through CIS?

Payments under contracts for construction operations as defined in section 74 of the Finance Act 2004. That covers construction, alteration, repair, extension and demolition of buildings, installing heating, lighting, drainage and similar systems, painting and decorating, and preparatory work such as site clearance, excavation, foundations, scaffolding erection and landscaping. Section 74(3) excludes, among other things:

  • the professional work of architects, surveyors and building or engineering consultants;
  • manufacture and delivery of materials and components;
  • installation of security systems, seating, blinds and shutters;
  • signwriting and wholly artistic works.

The reliefs available to deemed contractors do not extend to developers. Regulation 22 of the CIS Regulations, which exempts payments for property used for the payer’s own business (but never property held for sale, letting or investment), applies only to deemed contractors (CISR15140). The small payments arrangement for contracts up to £1,000 net of materials is also open only to deemed contractors, and HMRC will refuse an application from a mainstream contractor (CISR15150).

What does a developer have to do once in the scheme?

  • Register as a contractor before taking on the first subcontractor, using the process for setting up as a new employer, which produces an employer PAYE reference.
  • Verify each subcontractor with HMRC before paying them, and deduct at the rate HMRC gives: 20% for registered subcontractors, 30% for unregistered ones and nothing for those with gross payment status.
  • Calculate the deduction on the invoice after taking off VAT and the subcontractor’s own materials, consumables, plant hire and fuel other than for travel.
  • Give a payment and deduction statement within 14 days of the end of each tax month, and file the monthly return by the 19th.
  • From 6 April 2026, file a nil return for months with no payments unless HMRC has been told in advance that none will be made.

Our guide to bookkeeping for CIS covers the records. A developer that is a main contractor in a chain is also exposed to the 2026 supply chain rules described in CIS changes from April 2026.

What does this look like in practice?

Illustration only. Three people pay builders in the same year.

Who Work CIS position
Homeowner Extension to own house, paid £60,000 to a builder Not a contractor; householder exclusion
Individual buying a barn to convert into two houses for sale Pays a groundworker, roofer and joiner £180,000 in total Mainstream contractor from the first payment; must register, verify and deduct
Landlord with 30 flats Repairs, redecoration and new kitchens between lets, £200,000 Not a contractor; well below the £3 million deemed contractor threshold and no change of use

If the landlord then bought an office block and converted it into flats to let, that project would make the landlord a mainstream contractor for the conversion payments, despite the plan to keep and let the flats.

What if it is unclear whether the business is a developer?

HMRC says at CISR12080 that a business must decide its CIS status before making payments the scheme could apply to. If in doubt whether work is development or investment, the CIS helpline can refer the question to a technician who will review the facts submitted. Any view given depends on the facts supplied being complete, and the business must tell HMRC if they change.

What mistakes do developers make?

  • Assuming a one off or first project is too small for CIS; there is no threshold for mainstream contractors.
  • Treating a conversion to let as investment work, when HMRC regards a change of use as development.
  • Putting an architect’s or surveyor’s fees through CIS, or leaving a builder’s invoice out because it also covers materials; professional fees are excluded, while a builder’s invoice is in scope with only the materials element taken off before the deduction.
  • Relying on the deemed contractor own use exemption or small payments arrangement, which mainstream contractors cannot use.
  • Paying a new subcontractor before verifying them, so the wrong rate is applied, or skipping verification for a firm last used more than two tax years ago.

For an overview of how the scheme works for everyone in the chain, see our guide to the Construction Industry Scheme.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.