The rule in one sentence
Crane, excavator, concrete pump: if it comes with a driver or operator, CIS applies to the full payment. If it is left on site for you to use yourself, it is equipment and CIS does not apply. This is the most commonly misunderstood plant hire rule in the Construction Industry Scheme, and it regularly produces incorrect deductions running in both directions.
Why the distinction matters
Plant hire is a significant cost in groundworks, civils, demolition, and most large-scale construction. A contractor managing multiple plant hire contracts needs to know, for each one, whether to deduct CIS before paying the supplier. Getting it wrong in either direction creates problems:
- Incorrectly deducting from dry hire: the plant hire company suffers a deduction to which it is not subject. It may dispute the invoice, raise a complaint, or refuse to work with the contractor again. The contractor has also reported an incorrect deduction on its CIS300 return.
- Failing to deduct from operated hire: the contractor has made a payment to a CIS subcontractor without applying the required deduction. HMRC can pursue the contractor for the under-deduction.
The source rule appears in the HMRC CIS340 guide (updated 6 April 2026) and is grounded in the fundamental principle of CIS: the scheme applies to payments for construction operations, which are defined by Finance Act 2004 s.74 as operations related to construction, alteration, repair, and so on. An operator carrying out construction operations is providing labour. A piece of machinery sitting idle until the contractor's own workers use it is not.
Plant hire with an operator: CIS applies
When a plant hire company supplies both the plant and an operator to use it on the construction site, the supply is treated as a labour supply. The operator's skill and labour is the substance of what is being purchased: the plant is incidental to it. CIS applies to the payment made to the plant hire company.
Practical examples where the with-operator rule applies:
- Crane hire with a licensed crane operator
- Excavator hire with a digger driver
- Concrete pump hire with a pump operator
- Road sweeper hire with a driver
- Scaffolding supplied and erected by the scaffolding company's own workers (the most common scaffolding arrangement)
In each case, the contractor deducts CIS from its payment to the plant hire company. The deduction rate depends on the plant hire company's CIS status: 0% for GPS, 20% for registered, 30% for unregistered. The contractor must verify the plant hire company's status before the first payment, just as it would for any other subcontractor. See our guide to CIS subcontractor verification for the verification process.
The deduction base for operated plant hire is the total labour payment. Any separately stated consumable materials (fuel supplied by the plant hire company, for example) can be excluded in the same way as materials on any other CIS invoice. The plant element of the hire rate itself is not treated as "materials" for deduction-base purposes: it is part of the labour supply. This differs from the position when the subcontractor hires plant themselves and passes the cost through (see below).
Plant hire without an operator (dry hire): CIS does not apply
Dry hire is the supply of plant or equipment without any person to operate it. The plant hire company delivers the machine, leaves it on site, and collects it at the end of the hire period. The contractor uses its own workers (or separately engaged operators) to operate the equipment. No construction operations are being carried out by the plant hire company: it is supplying goods, not labour.
CIS does not apply to dry hire payments. The plant hire company is not a CIS subcontractor in relation to that transaction and should not be verified or deducted from.
Practical examples where dry hire applies and CIS does not:
- Scaffold tube and board delivery (where the contractor erects it with its own workers)
- Mobile welfare unit hire
- Skip hire (supply of a skip, collected when full)
- Temporary accommodation unit hire
- Generator hire without an operator
- Dumper truck hire where the contractor provides the driver
A plant hire company that only provides dry hire does not carry out construction operations within the meaning of Finance Act 2004 s.74. It is not a CIS subcontractor and does not need to register for CIS. Contractors who incorrectly deduct from dry hire invoices are making an error on their CIS300 return that HMRC can query.
The comparison: operated plant hire vs dry hire
| Feature | With operator (operated hire) | Without operator (dry hire) |
|---|---|---|
| CIS applies? | Yes | No |
| Nature of supply | Labour supply (construction operations) | Supply of goods (equipment only) |
| Deduction base | Full payment minus separately stated consumable materials | No deduction |
| Contractor must verify? | Yes, before first payment | No |
| Plant hire company registered? | Should be, to receive 20% rate rather than 30% | Not required (outside CIS) |
| Appears on CIS300? | Yes, in the relevant tax month | No |
The mixed scenario: operated plant hire alongside own labour
A more complex situation arises when a contractor hires operated plant from a plant hire company but also supplies its own labour to work alongside the operator on the same project. This is common in groundworks: an excavator with its own driver from a plant hire firm, plus groundworkers employed or engaged by the main contractor.
In this scenario the two streams are treated separately:
- The payment to the plant hire company for operated hire is a CIS payment. The contractor deducts at the appropriate rate.
- The main contractor's own workers are either PAYE employees (no CIS) or self-employed CIS subcontractors in their own right, verified and deducted separately.
There is no aggregation of the two streams. The plant hire payment is assessed as a standalone CIS payment to the plant hire company. The labour costs of the contractor's own workers are either payroll or CIS, depending on each worker's status.
Passing plant hire costs through in your own invoice
Subcontractors frequently hire plant to carry out their contracted work and include the hire cost in their invoice to the main contractor. This is where a different rule applies, which is often confused with the with-operator/dry-hire rule above.
When a subcontractor hires plant (on any basis, with or without operator) from a third party and passes that cost through in its own invoice, the hire cost can be treated as materials and excluded from the CIS deduction base. The HMRC CIS340 guide (section 3.14) states: "Where the subcontractor hires plant to carry out construction work, the cost of the plant hire and any consumable items such as fuel needed for its operation may be treated as materials for the purposes of calculating any deduction."
Importantly, this applies only to actually hired plant. A subcontractor cannot claim a notional deduction for plant they own. The exclusion is limited to genuine third-party hire costs that can be evidenced from invoices.
The table below shows how the deduction base is affected when a subcontractor passes through a plant hire cost:
| Invoice component | Amount | In CIS deduction base? |
|---|---|---|
| Labour (subcontractor's own workers) | £4,000 | Yes |
| Materials (bought for the job) | £1,500 | No |
| Plant hire cost (third-party hired excavator) | £1,200 | No (treated as materials) |
| Total invoice | £6,700 | |
| CIS deduction base (20% rate) | £4,000 | Deduction = £800 |
The deduction is £800, not £1,340 (20% of the whole invoice). The subcontractor must be able to show the contractor their plant hire invoice to support the exclusion. A contractor who cannot verify the hire cost must include the disputed element in the deduction base or risk an under-deduction finding.
For a full breakdown of which elements of an invoice are inside and outside the CIS deduction base, see our guide to CIS invoice splitting: labour and materials.
How to read a plant hire invoice
The single most useful skill for a contractor is reading a plant hire invoice correctly. Key indicators:
- Operated hire indicators: the invoice describes "operated plant hire", "plant and operator", "crane with banksman", or similar. An operator charge, driver rate, or operative day rate appears separately or is included in the total. The hire company's workers are named or their time is recorded.
- Dry hire indicators: the invoice describes "plant hire", "equipment rental", "machine hire", or similar with no person mentioned. The charge is typically a weekly or monthly rate for the equipment alone. The hire company's own staff do not appear on site to operate the plant.
- Ambiguous invoices: where it is unclear, ask the plant hire company for clarification before paying. Document the answer. If the company confirms dry hire, no deduction is made. If it confirms operated hire, verify and deduct. Do not guess.
Keeping a record of the basis on which each plant hire payment was treated is important for CIS300 accuracy. If HMRC queries why a plant hire company was or was not deducted from, contemporaneous documentation of the invoice analysis and any clarification obtained is the best defence.
CIS registration for plant hire companies
A plant hire company that provides operated plant hire is providing a construction labour service and is a CIS subcontractor. It should register with HMRC to secure the 20% deduction rate rather than 30%. The registration is free and done online. A plant hire company with consistent annual operated-hire turnover above £30,000 net can apply for Gross Payment Status to eliminate the deduction entirely, receiving its payments gross and settling the tax through its normal tax return.
Plant hire companies should be aware of the April 2026 change: from 6 April 2026, the nil return obligation was reinstated for contractors. Any plant hire company that also acts as a contractor (for example, by engaging subcontractors for site setup or maintenance work) must now file a CIS300 nil return in months when no subcontractor payments are made. For a full breakdown of contractor obligations, see our guide to CIS deduction rates explained and our guide on CIS record-keeping.
Scope of CIS construction operations and plant hire
The reason the with-operator distinction matters is that Finance Act 2004 s.74 defines construction operations by reference to what is being done, not who owns the equipment. Operations include construction, alteration, repair, extension, demolition and dismantling of buildings and structures, and civil engineering works. When an operator carries out any of these operations using a piece of plant, the operator is performing construction operations. When plant is simply supplied for others to use, no construction operation is being performed by the supplier.
For a detailed breakdown of which types of work fall within and outside the scope of CIS, see our guide to what construction work is not subject to CIS.