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HMRC internal manual

Construction Industry Scheme Reform Manual

Compliance: Regulation 9(5) directions: Direction under ‘Condition B’ at Regulation 9(4)

CISR83600 Action guide contents

The purpose of directions under Regulation 9(5) is to avoid the situation where HMRC pursues a contractor for a deduction that should have been made where the subcontractor has no liability, or has already met any tax liability, on the sum paid gross.

It follows the principle that HMRC should not recover more tax from both contractor and subcontractor than is correctly payable by the subcontractor. That is why the relief is sometimes known as ‘double taxation’ relief.

A request for a direction under Regulation 9(5) may be made at any time except where a Determination under regulation 13(2) has already been issued (see CISR83040). A direction under Regulation 9(5) may involve repayment if the contractor has already paid the amount of the deduction to HMRC. A direction under Regulation 9(5) also cannot later be made following the conclusion of an Employer Compliance settlement (see CISR83060).


SI2005/2045 reg 9(5) says that an officer of Revenue & Customs may direct that a contractor is not be liable to pay the excess to the Commissioner’s for Her Majesty’s Revenue & Customs.

Before making the direction the officer must be satisfied that ‘Condition B’ at Regulation 9(4) is fulfilled and that the subcontractor paid by the contractor is

  • not chargeable to tax in respect of those payments


  • has included those payments when computing their income or profits and has paid the Income Tax and Class 4 NIC or Corporation Tax due on those profits.

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Contractor’s processing office

Requests for Regulation 9(5) directions need to be dealt with by the contractor’s Processing Office and can only be made by a Higher Officer (HO) there.

To deal with the request, you need to get in touch with the Processing Office for the subcontractor involved. You may need to trace the office concerned but the contractor must provide you with enough information to trace the subcontractor’s Processing Office. If they cannot, you cannot agree any request.

You cannot make a direction in the contractor’s favour unless the subcontractor’s Processing Office reports that ‘Condition B’ has been met in that the subcontractor has made a return that includes the payments made by the contractor, and that the subcontractor has already paid the tax liability based on the income and profits shown by that return.

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Subcontractor’s Processing Office

The subcontractor’s Processing Office will be approached to establish whether the payment in question has been included in a return or accounts and whether the tax has been paid, or whether any liability to tax is likely to arise on the payment.

The HO examining the request from the contractor’s Processing Office may have difficulty in deciding whether the income has been included or not within the Self Assessment return submitted by the subcontractor. Where the income returned on the Self Assessment return is the same as, or is in excess of the amount(s) paid by the contractor to the subcontractor, you may make a reasonable assumption that the income has been included within the return(s) and, upon checking that the liability shown by the return(s) has been paid in full by the subcontractor, you may make a positive report to the contractor’s processing office to say that Regulation 9 ‘Condition B’ has been fulfilled.

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Employer Compliance or Compliance Teams

Where a claim is received under Regulation 9(5) by a Compliance officer then the procedures at COG909380 should be followed in making the direction, and not the guidance detailed immediately above.

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Simultaneous representations for a direction under Regulation 9(5) quoting both ‘Condition A’ - Regulation 9(3) and ‘Condition B’ - Regulation 9(4)

Contractors may make representations for relief under both provisions of Regulation 9 at the same time. In this case the officer authorised to act as a Collector, should consider the case initially.

If the officer is satisfied by the evidence supporting ‘Condition A’ at Regulation 9(3) (see CISR83020) they will make a decision in the contractor’s favour, and a Regulation 9(5) direction may be made. In this case there will be no need to pursue the question of whether ‘Condition B’ at Regulation 9(4) is also satisfied.

If the officer cannot resolve whether ‘Condition A’ at Regulation 9(3) (see CISR83020) is satisfied, they will defer making a decision and refer the request for a direction under Regulation 9(5) to the subcontractor’s Processing Office to consider whether ‘Condition B’ at Regulation 9(4) is satisfied. If it is, then a Regulation 9(5) direction may be made. Similarly, papers may be referred to the subcontractor’s Processing Office by a Compliance officer where a request for Regulation 9(5) direction is made to them quoting ‘Condition B’ at Regulation 9(4).

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There is no provision for a contractor to appeal under Regulation 9(7) against an Inspector’s refusal to make a direction under Regulation 9(5) ‘Condition B’. Regulation 9(8) states that the only grounds for appeal are as set out at Regulation 9(3), ‘Condition A’, that the contractor took reasonable care to comply with section 61 of the Act and these Regulations and* *that

  • the failure to deduct the excess was due to an error made in good faith, or
  • the contractor held a genuine belief that section 61 of the Act did not apply to the payment.