Section 74 of the Finance Act 2004 defines construction operations with two lists: work that is inside the Construction Industry Scheme and work that is taken out of it. Most building, civil engineering, installation, decorating and site work in the UK is inside, while architects and surveyors, carpet fitting, delivery of materials, scaffolding or plant hire without labour, security systems, signs, seating and blinds are outside. A contract with any construction element is generally inside in full.

How does the law define construction operations?

Section 74(2) lists the operations that count, subject to the exclusions in section 74(3). In summary they are:

  1. construction, alteration, repair, extension, demolition or dismantling of buildings or structures, permanent or temporary, including offshore installations (section 74(2)(a));
  2. the same work on civil engineering works, including walls, roadworks, power lines, electronic communications apparatus, runways, docks and harbours, railways, inland waterways, pipelines, reservoirs, water mains, wells, sewers, industrial plant and installations for drainage, coast protection or defence (section 74(2)(b));
  3. installation in a building or structure of systems of heating, lighting, air conditioning, ventilation, power supply, drainage, sanitation, water supply or fire protection (section 74(2)(c));
  4. internal cleaning of buildings and structures in the course of their construction, alteration, repair, extension or restoration (section 74(2)(d));
  5. painting or decorating internal or external surfaces (section 74(2)(e));
  6. operations that are integral to, preparatory to or for rendering complete the above, including site clearance, earth moving, excavation, tunnelling and boring, foundations, erecting scaffolding, site restoration, landscaping and access roads (section 74(2)(f)).

Section 74(1)(b) limits the scheme to work in the United Kingdom or its territorial sea. HMRC’s Construction Industry Scheme Reform Manual (CISR14070) treats the territorial waters as extending 12 nautical miles and excludes the Irish Republic, the Isle of Man and the Channel Islands. An overseas business doing construction work in the UK is inside the scheme; a UK business working on an overseas project is not.

What does the law exclude?

Section 74(3) takes out drilling for or extracting oil, gas and minerals; manufacturing building or engineering components, materials, plant or machinery, or components for building service systems, and delivering any of them to site; the professional work of architects, surveyors and consultants; wholly artistic works such as sculptures and murals; signwriting and signboards; installing seating, blinds and shutters; and installing security systems such as burglar alarms, CCTV and public address systems.

GOV.UK adds that work on a construction site which is clearly not construction, such as running a canteen or site facilities, is outside, and CISR14020 extends that to hostel, medical, safety, security and temporary office facilities.

Are architects, surveyors and other professionals inside CIS?

Architects and surveyors working within their normal professional discipline are excluded in all circumstances, whether on or off site (CISR14270 and paragraph A.27 of the CIS 340 guide). The exclusion is lost if an architect goes further and acts as developer or main contractor or manages the project.

Other professionals are excluded only if their role is purely consultative: designs, plans, technical assessments, reports and site testing. HMRC treats soil testing, non destructive testing and similar inspection work as comparable to surveying, but not where the “survey” also includes remedial work. Engineers, clerks of works and project managers who supervise labour or coordinate the work can be subcontractors, because section 58 covers anyone answerable to the contractor for construction carried out by others.

Is carpet and floor covering work inside the scheme?

Carpet fitting is outside. Statement of Practice SP12/81, described in CISR14170, treats it as excluded even when it is in the building specification, and the exclusion covers carpet tiles. Other floor coverings such as vinyl, linoleum, laminate and stripwood are inside when fitted as part of a wider construction project and outside when fitted in isolation. Synthetic sports surfaces are not carpet, so they are inside. Carpet fitting falls back into the scheme when it forms part of a mixed contract, for example laminate and carpets fitted under one contract.

How are scaffolding and plant hire treated?

Erecting scaffolding is named in section 74(2)(f), and paragraph A.19 of CIS 340 explains it as integral because other construction could not proceed without it. Hiring scaffolding with no labour is outside: GOV.UK lists it among exempt jobs.

The same line applies to plant generally. CISR14260 says payments for hiring plant without an operator are outside CIS and payments for plant with an operator are inside. A vessel hired with a crew that carries out operations is plant with operator; one hired bare is not. Delivering materials, including ready mixed concrete, is outside, but a separate business brought in to pump the mix around site is inside (CISR14220). How hired plant is treated inside a subcontractor’s invoice is covered in how CIS deductions treat materials.

What about building services, security and fit out work?

Section 74(2)(c) covers only the installation of systems. CISR14090 says repairs, part replacements and extensions are outside: replacing a boiler, a tap or a single circuit, or adding a radiator or sockets, is not installing a system, whereas a complete rewire is. Repairs become caught when the same contract includes making good the building. Installing solar panels to generate electricity is inside, except where the contract is directly with a private householder.

CISR14290 limits the security exclusion to dedicated electronic systems: burglar alarms, CCTV for security, public address systems, simple door entry systems and computerised locking. Gates, barriers, bollards, security fencing, door access systems needing structural work and safes built into the structure are inside, as is digging or erecting posts for CCTV. Under CISR14150 fitted kitchens, bathrooms, bedroom furniture, shopfittings and fixed racking are inside, but seating, blinds, curtains and louvred shutters are excluded by section 74(3)(h). Illuminated and electro mechanical signs, traffic signs and road markings are inside, while painted and static signboards are not (CISR14300).

How do mixed contracts and finishing work change the answer?

Paragraph A.4 of CIS 340 says that if a contract includes any construction operation, all payments under it come within the scheme, even if invoiced separately. The same activity can therefore be inside on one job and outside on another, which is why HMRC says the decision is made contract by contract.

Activity Usually inside CIS when Usually outside when
Cleaning Internal cleaning during or on completion of construction External or routine cleaning of existing premises
Landscaping and tree felling Part of site clearance or finishing a construction project Routine gardening, forestry or tree surgery
Fencing Part of a wider project, or posts set in concrete Isolated light fencing with posts driven into the ground
Insulation and soundproofing Part of a wider construction project Fitted in premises not undergoing construction with no effect on the fabric
French polishing Fixed woodwork on site Done off site in isolation

These come from CISR14110, CISR14140, CISR14200, CISR14240 and CISR14250.

Does the work being construction always mean CIS applies?

No. CISR14020 explains that there must also be a contractor and a subcontractor under a contract relating to construction operations. A private householder paying for an extension is not a contractor, and employees are outside because the scheme does not cover contracts of employment; see employment status tests. GOV.UK lists further exceptions, including work paid for by a charity or trust, and businesses outside construction become contractors only once their construction spend passes the threshold explained in deemed contractors under CIS. From 6 April 2026, regulation 23A of the CIS regulations, inserted by SI 2026/289, takes payments made to certain public bodies outside the definition of a contract payment.

What mistakes come up most often?

  • Deciding by trade rather than by contract. A tree surgeon or fencer can be inside on one job and outside on the next.
  • Treating a boiler replacement contract as outside when it also includes making good the walls.
  • Assuming all security work is excluded. Physical security such as gates and bollards is inside.
  • Splitting a mixed contract into separate invoices in the belief that the non construction part escapes. It does not.
  • Applying the architects’ exclusion to a design professional who is actually managing the site.

Once a payment is inside the scheme it must go on the contractor’s return; see CIS monthly returns and penalties and the overview in the Construction Industry Scheme explained.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

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.