Whether the Construction Industry Scheme applies to you turns on one thing. Does an operator go with the machine.
HMRC’s position is that hire of plant with an operator is subject to CIS, and hire of plant without an operator is outside the scope of it. Skips and equipment hired without an operator are excluded by name.
So a 13 tonne excavator sent out with your driver on a groundworks job is inside the scheme. The same machine collected by the customer on a low loader is not. It is one of the cleanest lines in CIS, and it still produces wrongly deducted invoices, because a contractor’s accounts office applies 20% to everyone on site.
Firms that do both have to split it
Most plant hire companies run operated and dry hire side by side, sometimes on the same job.
That has to show on the invoice. A single line saying “plant hire” invites a contractor to apply CIS to all of it, and once the deduction is taken you are reclaiming rather than negotiating. Operated hire on one line with the operator named, dry hire on another, and the treatment follows the paperwork rather than whoever is doing the payment run.
VAT follows the same line, because the domestic reverse charge only applies to construction services within CIS. Dry hire is charged with VAT in the normal way. Operated hire to a CIS-registered contractor who is not the end user is a different answer.
The fleet is the business
Plant hire is the most capital heavy trade we work with. How the machines are funded and written down matters more here than anywhere else, because the fleet is where the money is.
Hire purchase and leasing are not the same thing. They can look identical on a monthly payment schedule and behave differently in the accounts and the tax computation. On hire purchase the machine is your asset and sits on your balance sheet, with capital allowances available to you. On an operating lease the rentals are a running cost and the allowances sit with the lessor.
Firms get this wrong at the point of signing, long before anyone files anything.
Capital allowances on a hire fleet are their own question. Assets bought to hire out are not treated the same way as assets you use yourself, and the answer changes what a new machine costs after tax. Settle it before you sign the order.
Utilisation is the number that tells you the truth
Turnover tells you the fleet is busy. It does not tell you whether it is earning.
Utilisation does. Revenue days over available days, machine by machine, month by month. Run it and the pattern is nearly always the same. A handful of machines earn almost every day they exist. Behind them sits a tail of assets being insured, tested, financed and depreciated in the yard while producing nothing.
Every machine in that tail carries finance cost, insurance, inspection and yard space against income that does not cover them. Most operators know which machines they love. Very few know which ones paid for themselves last year.
Depreciation policy against what the machine is worth
Your depreciation policy is a set of assumptions somebody typed in years ago. The resale market is a fact.
When the two drift apart the balance sheet stops describing the fleet. Written down values far below auction prices make the business look poorer than it is in front of a lender. Values far above what the machine would fetch mean you have been under-charging for years and calling the difference profit.
Damage recharges
Machines come back bent. Recharging the customer is normal and usually done badly, as a note on the next invoice with no thought given to whether it is a supply for VAT or compensation for a loss. Damage income booked as hire revenue also flatters your utilisation.
What we do
Confirm which of your work sits inside CIS and which sits outside, set the invoicing up so contractors cannot apply the scheme to your dry hire, and reclaim what has already been deducted from work that was never in scope.
Get the funding treatment right across the fleet, including how hire purchase and lease agreements land in the accounts and the tax computation.
Utilisation and rate reporting by machine, so replacement decisions are made on evidence rather than on which asset breaks down most memorably.
Cash flow planning around finance payments and the lumps that fleet renewal arrives in.
Plus the usual underneath. Underneath it all, the usual. Year end accounts, corporation tax, VAT, payroll and self assessment.
Who we work with
UK plant hire limited companies turning over between £500,000 and £5 million, anywhere in the UK. Operated hire, dry hire and firms doing both.
Common questions
Does CIS apply to plant hire?
Hire with an operator is within the scheme. Hire without an operator is outside it. That is HMRC’s stated position.
We do operated and dry hire. How do we handle it?
Split the two on the invoice and make the operator element obvious. Contractors apply CIS to what they can see, so a single undifferentiated line gets deducted in full.
A contractor has deducted CIS from our dry hire invoices. Can we get it back?
Yes. Tell them first so it stops happening, then reclaim what has already gone through your corporation tax return or an in-year repayment claim.
Do we charge VAT on plant hire to a main contractor?
On dry hire, yes, because the reverse charge follows CIS scope and dry hire sits outside it. On operated hire to a CIS-registered contractor the reverse charge can apply, so check it against the customer rather than assuming.
Can we claim the cost of a new machine against tax?
Often a large part of it, and the answer depends on how the machine is funded and how assets held for hire are treated. Ask before you sign the finance agreement, because the funding choice fixes the tax answer.
Book a call. Send us your fleet list and last month’s hire invoices, and we will tell you which machines earned their keep and whether anyone is deducting CIS from work that was never in the scheme.
Common questions
Does CIS apply to plant hire companies?
Whether the Construction Industry Scheme applies to you turns on one thing. Does an operator go with the machine. HMRC’s position is that hire of plant with an operator is subject to CIS, and hire of plant without an operator is outside the scope of it. Skips and equipment hired without an operator are excluded by name.
Does the VAT domestic reverse charge apply to plant hire companies?
It follows the CIS answer above. Where the work falls inside CIS and your customer is VAT registered, registered under CIS and is not an end user, the reverse charge applies and you do not charge VAT. Where the work falls outside CIS, or the customer is an end user or a homeowner, you charge VAT as normal. Two jobs in the same week can be treated differently.