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HMRC internal manual

Compliance Operational Guidance

Supporting Guidance: employer compliance: guidance by subject: letter of offer: direction under regulation 9(5)


COG909360 provides the background to considering a direction under the Income Tax (Construction Industry Scheme) Regulations 2005.

COG909370 and COG909380 provide guidance on the process to follow when considering a direction.


A direction under Regulation 9(5) does not reduce the figure on which penalties are calculated. However where the direction is as a result of a Regulation 9(3) claim see COG914025.

Where the direction is a result of a Regulation 9(4) claim, the contractor remains liable to penalties on the full amount of tax which should have been deducted, or accounted for, in accordance with the Regulations, see COG914030.


A CIS direction will reduce the figure on which interest is charged. Interest is only charged on any balance of tax remaining payable by the contractor after a direction has been made. The contractor will not be liable for interest on any amounts which have been covered by a direction.

Contract Settlement

Letters of offer should include a specific reference to the amount of tax directed under Regulation 9(5).

You should use one of the following specimen letters in cases that include a direction under Regulation 9(5).

  1. Regulation 9(5) lump sum specimen letter of offer (Word 31KB)
  2. Regulation 9(5) instalment letter (Word 48KB)
  3. Regulation 9(5) suspended penalty & lump sum specimen letter of offer (Word 48KB)
  4. Regulation 9(5) suspended penalty instalment specimen letter of offer (Word 50KB)

This can be varied depending on the contractor entity, for example sole proprietor, partnership, company and whether an instalment arrangement is agreed. The following are examples of how the offer should be prepared to issue to the contractor where

If you have any difficulties in constructing a letter of offer you should consult Tax Administration Litigation & Advice.


As you are including the amount directed in the letter of offer and because you will not be moving payments from one source to another, it is essential that only the net amount recoverable from the contractor is recorded on SAFE.

In the examples above this will be:

£8,228 where part tax directed, and

£1,554 where the full amount is directed.

Compliance Revenue

Only the net amount recoverable can be claimed as compliance revenue.