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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: construction industry scheme (CIS): regulation 13 income tax (construction industry scheme) regulations 2005 - background

Regulation 13 is used mainly where

  • a contractor has failed to make deductions under the Construction Industry Scheme and
  • there has been no direction made under Regulation 9(5) in relation to claims under Regulation 9(3), or Regulation 9(4), that the contractor is not liable to pay the amounts under-deducted.

Regulation 13 determinations may be used in cases where

  • a contractor disputes liability or
  • attempts to agree a contract settlement have failed.

There is more guidance in the CISR Manual on when it may be appropriate to issue Regulation 13 Determinations at CISR83010 and CISR82060 (failure to submit monthly returns).

The legislation provides that where

  • there is a dispute between a contractor and a subcontractor as to

    • whether a payment is made under a construction contract, or
    • the amount, if any, deductible by the contractor from a payment to the subcontractor, or
  • there is reason to believe that the amount which a contractor is liable to pay to the collector is greater than the amount, if any, paid by the contractor, or
  • it is considered necessary in all circumstances

a determination can be made under Regulation 13(2) of the amount, according to the best of judgment, that the contractor is liable to pay under the Regulations.

The amount determined as shown on the determination is due and payable 14 days after the determination is made.

Such a determination can be appealed by the contractor.

Action by Caseworker

Actions regarding claims for directions under Regulation 9(5) must be dealt with prior to the issue of a Regulation 13(2) determination. COG909400 explains what these actions are.

Where during the course of a compliance check it is discovered that any of the above apply, a Regulation 13(2) determination should be issued to resolve the matter. COG909400 

When preparing to issue determination(s) full consideration should be given to Regulation 13(4) which provides that a determination under this regulation may -

  • cover the amount payable by the contractor under section 61 of the Act (or S559 of ICTA 1988 prior to 06-04-07) for any one or more tax periods in a tax year, and
  • extend to the whole of that amount, or to such part of it as is payable in respect of -

    • a class or classes of subcontractors specified in the notice of determination (without naming the individual subcontractors), or
    • one or more named subcontractors specified in the notice.

For any failures or disputes arising from the new scheme it may avoid unnecessary appeals if the determination notice lists each tax period (month) where it is considered a failure occurred.

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Action by Manager

Under Regulation 13(3) a determination must not include any amount in respect of which a direction under Regulation 9(5) has been given.

It follows, therefore, that each case for which the issue of a determination is considered appropriate, all claims for a direction under Regulation 9(5) received from a contractor under either Regulation 9(3) ‘Condition A’ or Regulation 9(4) Condition B must first be considered before authorising issue of the determination (COG909400).

The manager should approve the issue of Regulation 13 determinations on a case by case basis and must ensure full consideration is given to Regulations 9(3) and (4).

The manager will also provide support to the CI Caseworker if the contractor appeals the determination(s).

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Regulation 13(5) provides that a determination made under paragraph 13(2) ‘shall be due and payable 14 days after the determination is made’. However any appeal has to be made in writing specifying the grounds of the appeal within 30 days (S31 TMA 1970).

For guidance on appeals see the Appeals, Reviews and Tribunals Guide (ARTG).

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Where there is evidence of a liability to a penalty you should

In cases where no appeal has been received 

  • wait 30 days from the issue of the determinations
  • obtain confirmation of whether an appeal has been received and
  • if no appeal has been received commence formal action to raise penalties COG914175.

In cases where an appeal is received

  • commence formal action to raise penalties COG914175 
  • write to the employer to advise that this is being done.