CISR83050 - Compliance: Regulation 9(5) directions: Direction under ‘Condition B’ at Regulation 9(4)
Source: gov.uk (2025-09-10)


CISR83600 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/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 been finalised (see CISR83040 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/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 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/cisr83060)).

The relief given under Regulation 9(5) has no effect on any incorrect or inaccurate CIS300 monthly return penalties or the penalties for the failure to submit CIS300 monthly returns, as the requirement to submit a correct and accurate return by the relevant filing date still applies.

The appropriate incorrect or inaccuracy penalty is chargeable on the amount of the original under-deduction by the contractor prior to any relief under Regulation 9(5) being applied in part or in whole.

The behavioural tax geared element of the failure to submit penalty should also be based on the original amount of under-deduction prior to any relief under Regulation 9(5) being applied in part or in whole.

Legislation

SI2005/2045 reg 9(5) says that an Officer of Revenue & Customs may direct that a contractor is not 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
or
- has made a return in which the payments were taken into account and paid the Income Tax and Class 4 National Insurance Contributions or Corporation Tax that is due on the income of profit.
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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 an Officer of Revenue and Customs, should consider the case initially.

If the officer is satisfied by the evidence supporting ‘Condition A’ at Regulation 9(3) (see CISR83020 (https://www.gov.uk/hmrc-internal-manuals/construction-industry-scheme-reform/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.

Where the officer considers ‘Condition A’ at Regulation 9(3) is not satisfied, they will consider whether ‘Condition B’ at Regulation 9(4) is satisfied. If it is, then a Regulation 9(5) direction may be made.

Where the tax is fully relieved under ‘Condition B’ at Regulation 9(4), a refusal notice under Regulation 9(6) is not required.

Where the tax is partially relieved under ‘Condition B’ at Regulation 9(4) and the officer considers ‘Condition A’ at Regulation 9(3) is not satisfied, a refusal notice under Regulation 9(6) should only be issued for the outstanding tax not relieved by ‘Condition B’.

Appeals

There is no provision for a contractor to appeal under Regulation 9(7) against a 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 andthat
- 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.