The CITB Levy – As easy as A B C?

The Construction Industry Training Board (CITB) works with construction companies to keep the UK construction industry well-skilled and competitive. The CITB accomplish this by providing a number of services including access to funding and support services for skills and training. However, as many of you well know, the CITB are only able to provide such services as a result of levying employers within the construction industry.

Traditionally employers within the construction industry who satisfy the eligibility criteria would be levied by the CITB. The levy would comprise of PAYE payments and subcontractor payments as set out in the relevant Levy Order which tends to change every three years. The latest Levy Order, being the Industrial Training Levy (Construction Industry Training Board) Order 2015, has introduced significant changes which has the effect of collecting the levy from companies, other than construction companies, who operate within the construction industry (such as agencies or umbrella companies).

Previously, the levy was calculated on the following basis:
A (0.5% of your PAYE payments) + B (1.5% of your labour-only subcontractor payments) – C (1.5% of payments received as a result of labour-only agreements).

As you can see, where an employer receives payment for the supply of labour only services within the construction industry, then that employer can offset such payments against their levy. This would mean agencies or umbrella companies who only provide labour would pay no levy as the entire amount could be offset. However, this is no longer the case because for the 2015/16 tax year the Levy Order is calculated on the following basis: A + B

A = 0.5% of all emoluments which have been paid or are payable by the employer to or in respect of persons employed by the employer.
B = 1.25% of the relevant part of all contract payments made by the employer at or from the establishment. The relevant part of the contract payment has the meaning given to it by ss. 60 and 61 of the Finance Act 2004. This means B is an amount equal to 1.25% of net (taxable) CIS payments.

In a nutshell, the change in the new Levy Order means an employer can no longer offset their labour-only payments against their levy assessment and would now be expected to pay the levy. You will also note the change to ‘B’ which affects all employers liable to pay the levy because the CITB are now using figures that have been submitted to HMRC using CIS300s to calculate the amount payable which for certain size businesses will increase costs.

The CITB levy is a crucial factor to be aware of in the construction industry and it is important to stay ahead of the changes and determine how best to deal with the levy from both a financial and commercial viewpoint.

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How can we help you?

We offer a number of services to assist in all aspects of the CITB levy. We can start by carrying out an in-depth review of your company to establish whether you should actually be levied in the first place which is particularly important if you have a number of companies all levied under the same CITB reference. Based on this review we can provide you with a number of solutions and suggest the best course of action for your company on how to minimise the impact of the levy. Where the levy is only applicable to you in relation to a specific client, we can of course advise you on potential solutions in relation to that specific contractual arrangement.

Perhaps your levy assessment seems excessive? If this is case we can review your levy assessment together with a review of your company to determine whether the assessment has been over calculated and, based on our findings, we can challenge the CITB. It is important to note that if you want us to challenge a Levy Assessment Notice we must do so by applying to the Employment Tribunal within one month of the Notice. This would protect your position while we liaise with the CITB directly and try to resolve this matter outside of commencing legal proceedings. In the event no resolution is reached outside of proceedings we can still bring a claim in the Tribunal as result of making a protective claim beforehand. If you are outside the time limit we can still challenge the CITB by liaising with their legal team directly.

We can also assist with general CITB enquiries so please feel free to call us with your enquiry and find out how we can help you.