CISR14048 - The Scheme: construction operations: Payments made by landlord to tenant 鈥� Regulation 20A

From 6 April 2024, SI2005/2045 Regulation 20A allows most payments made for construction work by a landlord to a tenant to fall outside the scope of the CIS provided certain conditions are met. The rules remove payments by a landlord to听the tenant that occupies or will occupy the property for construction operations works intended primarily for the tenant鈥檚 benefit and use.

Not all payments made by landlords to tenants are outside the scope of CIS. The rules are听intended to prevent landlords artificially routing payments through a tenant.

There are no special rules for corporate groups.

All of the of the following conditions must be met for 颈迟听to apply.听

Regulation 20A(1)(a)听

The payment is made by or on behalf of the landlord. The definition of a landlord includes: -听

  • the legal owner or beneficial owner听

  • where the property is sub-let, the head landlord or any intermediate landlord

  • where the lease has not yet commenced the person who will grant the lease if there is an enforceable agreement to enter into the lease in place

A property may be held or managed by an agent, nominee or manager on behalf of the landlord. 听Regulation 20A(1)(a) will be met if they make the payment to the tenant on behalf of the landlord. A payment from the developer completing the construction work for a landlord would not normally meet this condition.

Regulation 20A(1)(b)听

The person receiving the payment is a tenant or prospective tenant of the landlord. The definition of a tenant includes a sub-tenant but does not include someone occupying the property under a licence.

Regulation 20A(1)(c)听

The payment is for construction operations agreed in connection with a lease or an enforceable agreement to enter into a lease. The exemption can therefore apply not only where it is part of the initial agreement for a lease, but it may also apply at other times where the lease is varied or extended.听

Regulation 20A(1)(d)听

The tenant that occupies or will occupy the property will carry out the construction operations itself, or a third person will carry out the construction operations under a contract with the tenant. A鈥痗ontract鈥痬eans any legally binding agreement or arrangement (see CISR14020).听听

The tenant may enter into听contracts with one or more subcontractors to carry out the work. Where听subcontractors engage听other subcontractors to undertake the work听the payments they make would be within the scope of the CIS.听听

The contract does not need to be in place at the time the payment is made but the landlord will need to satisfy themselves that there will be a contract in place for the work with a third person.听This could be听evidenced听by听way of a warranty given by the tenant to the landlord or the landlord requiring听copies of any invoices.听

Regulation 20A(1)(e)听

The payment is for construction operations relating to works intended primarily for the benefit and use of the tenant that occupies or will occupy the property under the lease. To note, it is the works rather than the payment that must be primarily for the benefit and use of the tenant.

The payment must be made to a tenant that occupies or will occupy the property. Occupation requires a physical presence with some degree of permanence, not simply a legal entitlement over the property.

Regulation 20A(1)(e) would not normally be met for work to complete, or repairs to, the 鈥榗ore鈥� or 鈥榮hell鈥� of a building as the landlord would have needed to complete it to allow any tenant to occupy the property and they receive an enduring benefit from this work being completed. Therefore, in HMRC鈥檚 view, the landlord would benefit at least as much as the tenant from this work.

However, HMRC would accept that construction work to the core and shell within the area leased and occupied by the tenant (鈥榯he demise鈥�) would satisfy Regulation 20A(1)(e) where it can be shown that the tenant required it to be completed in a specific way to meet their needs and they are the main user. 听Construction work outside the demise would only qualify if the tenant will be the main beneficiary user of the works.

  • Core is the internal support system of a building, including foundation, load-bearing walls, and structural elements. This would include essential services like elevators, stairs, plumbing, electrical systems, and heating and ventilation systems. It does not include non-structural parts of the building like partition walls, flooring and internal doors
  • Shell is the external envelope or framework enclosing the building, including exterior walls, roof, windows and basic infrastructure


Condition met Condition not met
Construction work completed within the demise occupied and used by the tenant where the works are completed to meet their specific needs.

Construction work outside the demise where the tenant is the primary beneficiary and user of the works.
 Where all occupiers of the property benef颈迟听and make use of the changes. For example, general refurbishment and upgrade of common areas used by all tenants in a building occupied by several tenants.
Changes to the property that are required to install specific fixtures and fittings required by the tenant.

Removal of the fit outs from a previous tenant as part of the new tenant specific fit outs
 Work to complete, or repairs to, the core or shell of the building. For example, replacement windows, roof repairs, installation of new fire equipment required under Health and Safety rules.
All of the payment relates to construction work intended primarily听for the benefit and use of the tenant occupying or who will occupy the property.
 Only part of the payment is for works that are for the primary benefit and use of the tenant that occupies or will occupy the property.
The payment relates to construction work intended primarily for the benefit and use of the tenant and their sub-tenants who together occupy or who will occupy the property.
 The payment relates to construction work intended primarily for the benefit and use of sub-tenants where the tenant receiving the payment does not occupy or will not occupy the property.

The payment relates to construction work intended primarily for the benefit and use of those occupying the property under licences.

Guidance Referral Service:听听

It is important that a business decides before making payments if the CIS applies. If you are in doubt as to whether the payment you are making meets the Regulation 20A conditions, you may call the CIS helpline on 0300 200 3210 and request to speak with a technician. The technician will provide you with a dedicated drop box link where you鈥檒l be able to submit any information you want HMRC to review and provide advice on.

Please note, any view provided by HMRC is in line with HMRC鈥檚 general policy on providing advice to taxpayers. 听The responsibility lies with听the taxpayer to supply HMRC with all relevant facts and inform HMRC if those facts have materially changed. 听Further guidance can be found at 听/guidance/when-you-can-rely-on-information-or-advice-provided-by-hm-revenue-and-customs