CISR83620 - Compliance: Regulation 9(5) directions: Regulation 9(4) ‘Condition B’ claim - Contractor's Processing Office

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This action guide explains what you should do on receipt of a request for a direction to be made under Regulation 9(5) ‘Condition B’ from a contractor for whom your office is the Processing Office.

Action required in the subcontractor’s Processing Office is covered at CISR83630.

  1. Send the contractor an acknowledgement of receipt of the request unless this has already been done by another HMRC office that has passed the request to you.
  2. Identify the Processing Office for the subcontractor from whose payments the contractor has not made the required deductions.
  3. Write to the subcontractor’s Processing Office using the sample letter set out below.

‘There is evidence that my contractor paid your subcontractor £XX.XX in full in the tax month ended 5/MM/YYYY without making the necessary deduction. In the first instance, therefore, my contractor is liable for the deduction that should have been made under Section 61, Finance Act 2004. However, the contractor has asked me to make a direction under Regulation 9(5) of Statutory Instrument No 2045 of 2005, relieving them of the liability on the basis that your subcontractor is not liable to tax or has accounted for the payment and paid any tax on it.

Please examine your subcontractor’s file and let me know whether you consider that:

  1. the gross payment referred to above has been included in the subcontractor’s return or business accounts, and
  1. any tax, and Class 4 NIC if appropriate, chargeable on the subcontractor for the relevant year or accounting period has been paid by them.

You will find an action guide for this kind of request in the CISR Manual at CISR83630. Note that you may be able to say with confidence that the conditions are likely to be or likely to have been met - see CISR83060.’

  1. Put your papers on BF until the report is received from the subcontractor’s Processing Office.
  2. If the report is to the effect that ‘Condition B’ at Regulation 9(4) has been met, proceed as follows
  • send a letter to the contractor (or agent) saying that the request for a direction under Regulation 9(5) has been accepted
  • if the request was referred to you by Debt Management and Banking (DMB) or a Employer Compliance officer, return their papers with a report saying that the request has been accepted and attach a copy of the letter sent to the contractor
  1. If the report is to the effect that the subcontractor’s processing office concludes that ‘Condition B’ at Regulation 9(4) has not been met, proceed as follows
  • send a letter signed by a Higher Officer along the lines of that set out below to the contractor (or agent) saying that you are unable to make a direction under Regulation 9(5).

‘Consideration has now been given to the request that you/your client should be relieved of the liability to pay over to HMRC the amount deductible from payments made to the following subcontractor(s). [Enter subcontractor name(s) here]

I have taken into account all the available evidence but I am not satisfied that ‘Condition B’ at Regulation 9(4) of the Income Tax (Construction Industry Scheme) Regulations 2005 has been met. I regret therefore that I am unable to direct under Regulation 9(5) that you/your client should be relieved of the requirement to pay over to HMRC the amount(s) under-deducted, or any interest in respect thereof. [Where DMB has deferred making a Regulation 9(5) decision (see CISR83020) pending your conclusion under ‘Condition’ B’ at Regulation 9(4), add the following sentence] A copy of this letter has been sent to Debt Management and Banking who will be contacting you.’

  • if the request for a direction under Regulation 9(5) was referred to you by DMB or a Employer Compliance officer, return their papers with a report saying that the request has been rejected and attach a copy of the letter sent to the contractor.