I did a small extension about a year ago. I used the boxes behind the downlights. The BCO was well chuffed and commented that he wouldn't have signed off a completion without them. He said the insulation layer is required to be continuous, but didn't elaborate on exactly which bit of the regs that comes from.
I believe the document you refer to is out of date, having been published before the latest amandments to BRs.
The BCO concerned may have been refering to L1A, section 5.9, which says:
"the building fabric should be constructed so that there are no reasonably avoidable thermal bridges in the insulation layers caused by gaps within the various elements"
I sell downlight insulation shields to my clients on the two pronged basis of thermal efficiency (of great concern to most people as fuel prices continue to rise) and safety (they prevent downlights being covered accidentally, eg by boxes in a loft which can [and do] catch fire). Not had anyone refuse them yet.
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Instead of shunning them, treat them as a business opportunity. More material profit and more installation work = more earnings. Every little helps.