Are you a Property Developer or Investor for CIS Tax purposes?

Property developers

Property developers are included within the meaning of mainstream contractors for the Construction Industry Scheme (CIS) because their business activity is the creation of new buildings, or the renovation or conversion of existing buildings, or other civil engineering works. The same is true of a speculative builder.

Property investment businesses

A ‘property investment business’ is not the same thing as a ‘property developer’. A property investment business acquires and disposes of buildings for capital gain or uses the buildings for rental; it need not be involved in the construction, alteration or extension of buildings. Even so, if its property estate is substantial enough, its expenditure on construction operations may well cause it to fall within the meaning of a ‘deemed contractor’ (see CISR12050).

The Badges of Trade

There are also we established indicators which help determine whether you are an investor or a developer (trading), the factors below would indicate that you are a developer (which includes property flipping)

  • Profit Motive – did you buy the property with the selling it quickly for a profit
  • Property Finance – developers have loans and development finance (not long term mortgages)
  • Frequency – a company regularly buying and selling properties is likely to be trading and to be classed as developer
  • Duration – it the period between buying and selling is short that would indicate that you are not an investor
  • Work Carried Out – If major works are undertaken with a view to sale that sounds like a developer
  • Agreements – have you asked agents for sale prices or rental

Example from CISR12080 – Construction Industry Scheme Reform Manual – HMRC internal manual – GOV.UK (

A property investment business acquires a number of properties which it intends to let, but before letting, minor refurbishment is required to bring the properties up to a suitable standard to be able to let them. For CIS purposes we would see this as the normal activities of a property investor, and where the expenditure on such activities exceeds £3million in a rolling 12 month period then CIS applies.

The property investment business then acquires a large dilapidated hotel to add to its portfolio, and decides to convert the building into a series of flats which it will then individually let out. As a result, substantial development is required to the property to change the building to its new use. In respect of this particular development and contract we would regard the property investment business as having taken on the mantle of a mainstream contractor as its business activity is now that of construction operations.

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