CIS accounting

CIS compliance for plant hire companies.

Plant hire is the one area of construction where a single decision -- whether an operator goes with the machine -- determines whether CIS applies at all. With-operator hire is a CIS labour supply and the full labour element of the payment is subject to deduction. Dry hire (machine only, no operator) is outside CIS entirely. For plant hire businesses operating both models, the correct classification of each contract determines whether you are a CIS subcontractor, a CIS contractor, both, or neither. Getting it wrong costs money: incorrect CIS deductions on dry hire reduce your cash flow, and failing to operate CIS on with-operator hire creates a penalty exposure.

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CIS deduction on dry hire (machine only, no operator)

20%

CIS deduction on with-operator hire (labour element)

£30,000

Per-director GPS turnover test (limited company)

The specific challenges

What makes plant hire companies accounting different.

With-operator vs dry hire: getting the classification right on every contract

HMRC's position is clear: where plant is hired with an operator, the operator is supplying construction labour and the labour element of the payment falls within CIS. Where plant is hired without an operator (dry hire), the hire charge is for the use of an asset and does not fall within CIS. Many plant hire contracts sit between these poles: an operator who assists with setup and moves the machine between positions but leaves site while the machine is in use, for example. Where there is ambiguity, document the scope of any operator involvement and apply the classification consistently. Mixed contracts -- where part of a hire is operated and part is dry -- require splitting at the invoice level.

Incorrectly deducted CIS on dry hire and recovering it

Construction main contractors occasionally apply CIS deductions to dry hire invoices, either through misunderstanding or administrative error. If your company receives CIS deductions on dry hire payments that should be outside the scheme, you are being under-paid without entitlement. For sole traders and individuals, the overpayment can be recovered through Self Assessment. For limited companies, the EPS mechanism allows real-time recovery of CIS suffered against PAYE/NIC liabilities. We identify incorrect deductions, raise them with the paying contractor and, where correction before year-end is not achieved, ensure the amount is recovered via the correct mechanism.

Operator payroll vs CIS subcontractor status

Plant hire companies that supply operators with machines face an employment status question: are the operators employees (PAYE/NIC), CIS subcontractors, or something more complex? The April 2025 employer NIC increase to 15% above £5,000 raises the cost of direct employment. CIS subcontractor status requires genuine self-employment and the operator having the right to substitute and bearing financial risk. Getting this wrong in the direction of false self-employment creates employer NIC arrears and potential penalties. We review the contracts and working practices for each operator category and advise on the correct treatment.

GPS for with-operator hire income and supply-chain due diligence

Plant hire companies with significant with-operator hire turnover may qualify for GPS on that income stream, receiving payments without CIS deduction. Since April 2026, holding GPS requires documented pre-payment due diligence from any contractor paying you, and your own due diligence on any subcontractors you pay (for example, when you hire in additional operators from a labour provider). Finance Act 2026 makes a single undocumented supply-chain connection to fraud a potential GPS revocation event.

How we help

What we do for plant hire companies.

Contract classification and CIS protocol

We review your standard hire contract terms and help you establish a clear, documented protocol for classifying each hire as with-operator (CIS in scope) or dry hire (outside CIS), handling mixed contracts at invoice level, and verifying the CIS status of any subcontract operators before payment.

Recovery of incorrect CIS deductions on dry hire

Where main contractors have applied CIS deductions to dry hire invoices, we identify the amounts, communicate the correct position to the paying contractor, and manage recovery through either direct correction, Self Assessment (sole trader/individual operators) or the EPS mechanism (limited company). We also advise on the record-keeping needed to support the recovery claim.

GPS application and April 2026 compliance

We manage the GPS application for plant hire companies qualifying on with-operator hire income, including the net turnover calculation (excluding dry hire income and VAT), the three qualifying tests, and the documented pre-payment due-diligence workflow required from April 2026 under Finance Act 2026.

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Questions from plant hire companies

We hire plant with and without operators on different contracts. Do we need to operate CIS on all of them?

No. CIS applies only to the with-operator hire. Dry hire -- machine only, no operator -- falls outside CIS because it is a hire of an asset, not a supply of construction labour. On contracts that involve both (for example, an operator during setup and then dry hire for the remainder of the engagement), you split the invoice and apply CIS only to the labour element of the with-operator period.

A main contractor has deducted CIS from our dry hire invoices. How do we recover it?

First, write to the main contractor setting out why the deduction was incorrect (dry hire is outside CIS, no labour element). If they correct it on a future payment, the issue resolves. If they do not, the mechanism for recovery depends on your trading structure. A limited company can offset CIS suffered (including amounts incorrectly deducted) via the EPS against its PAYE/NIC liabilities in real time. A sole trader recovers the amount through Self Assessment at year end. We manage either route and keep a record of the incorrect deductions to support the claim.

Can we hold GPS on with-operator hire income even though we also do dry hire?

Yes. The GPS turnover test is applied to your net CIS income, which is the labour and construction-services element of with-operator hire. Dry hire income does not form part of the CIS turnover calculation. For a limited company the test requires either £30,000 per director or £100,000 total net CIS turnover. We calculate the qualifying figure using your with-operator hire income only, stripping out materials, dry hire and VAT.

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Book a free call. We will talk through your CIS position, your deduction history and whether there is anything worth changing. No hard sell, no obligation.

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Specialist in CIS and construction accounting, not a generalist practice

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24-hour response guarantee

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Fixed fees, quoted before we start

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Other trades we work with

Plumbers Electricians Joiners and Carpenters Groundworkers Roofers

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