The UK renewables sector is scaling at pace. Across wind, solar, battery storage and grid projects, we're seeing significant capital investment, ambitious timelines and increasingly complex delivery models becoming the norm.
One issue we see catching businesses off guard time and again is the Construction Industry Scheme ("CIS"). When CIS is mentioned, traditional building sites usually come to mind, but HMRC's definition of construction operations is far wider than many expect, and it firmly applies to renewables.
For businesses focused on delivery, innovation and returns, CIS can feel like an administrative detail. In practice, it presents material cash flow, regulatory and reputational risk if not managed correctly.
Any business carrying out construction operations in the UK can fall within scope, even where construction isn't its primary activity. In renewables, this commonly includes installation of wind turbines and associated infrastructure (often including enabling or preparatory works), fabrication of supporting structures, groundworks, cabling and grid connections, repair, maintenance and refurbishment of certain assets and decommissioning or repowering projects.
Renewable projects are rarely straightforward. Joint ventures, SPVs, EPC structures and layered supply chains can make it unclear where CIS responsibility sits and errors can lead to backdated withholdings of up to 30% of the contract value, penalties, interest and prolonged HMRC engagement.
A business may be a Subcontractor, a Contractor, or both. A Subcontractor is a business that carries out construction work for a Contractor. A Contractor is a business that pays others to undertake construction work. This can include businesses whose primary activity is not construction, but whose construction spend exceeds £3m over a rolling 12 month period.
Where a business is an unregistered Subcontractor, payments received on in-scope projects may be subject to deductions of up to 30%, restricting working capital. Securing gross payment status, where conditions are met, allows businesses to be paid without deduction, improving cash flow and reducing reliance on repayment claims.
For Contractors, obligations include verifying Subcontractor payment status, making correct deductions and submitting monthly returns. Early identification of CIS exposure is critical, as unexpected deductions can strain commercial relationships where expectations are misaligned. If deductions aren't handled correctly, the Contractor is liable for the tax that should have been withheld, along with penalties and interest.
CIS rarely exists in isolation either it frequently overlaps with off-payroll worker rules and wider employment status risk.
With HMRC scrutiny in the energy transition space increasing, we'd encourage any business involved in renewables to take a proactive look at its CIS position before issues arise. If you'd like to discuss your specific circumstances, please get in touch at Claire.Bruce@azets.co.uk or visit https://www.azets.com/.
Azets is a UK top 10 accountancy and business advisory firm, with a dedicated team of energy specialists who understand the unique challenges and working practices in the renewables sector in Aberdeen and beyond.
Claire Bruce is a Senior Manager in our Employment Tax team in Aberdeen specialising in PAYE and NIC, Off-payroll working and the Construction Industry Scheme. Claire works closely with clients in the energy sector, delivering practical and commercially focused solutions that reduce employment tax risk while identifying opportunities to achieve cost savings and improve business processes.