CITB Legislation – Changes to the levy 2015
As an employer in the construction industry, there is a statutory obligation to pay a levy to the Construction Industry Training Board (CITB).
Historically, the levy has been paid based on the following:
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0.50% of employees taxable pay
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1.50% of payments made to subcontractors who are ‘labour only’
From 2017, the following basis of measurement should be used to calculate the levy due to the CITB:
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0.50% of employees taxable pay
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1.25% of the taxable value of payments made to subcontractors that have a ‘Net’ status under the HMRC Construction Industry Scheme (CIS)
Whilst the changes have been widely publicised by CITB as applying from 2017, the payments in 2017 are based on returns due during 2016 on payments made in the 2015/2016 tax year. Therefore in reality, the changes are effective from 6th April this year (2015).
It will become necessary to add in an additional clause to sub-contracts to enable the recovery of the levy from sub-contractors and protect the commercial position of your business.
Suggested Clauses
For a copy of suggested clauses, please email us.
Works in progress
Generally speaking in existing contracts, there will be no grounds for recovering CITB from non-labour only Subcontractors that have a Net CIS status.
Classification of interim valuations & final accounts
Given the impact on the CITB deduction, a greater emphasis is needed to accurately identify qualifying CIS deductions (materials etc.). Unlike tax, the CITB levy deduction will hit the subcontractor’s profit rather than just their cash flow.
Some leading experts have suggested that this may even go as far as requiring the sub-contractor to submit evidence of material cost by providing copies of invoices to substantiate any qualifying deductions.
This will obviously be met with some resistance from sub-contractor’s owing to the commercially sensitive nature of the information been requested.
Commercial Impact
Historically, the difference between the CITB levy paid and that recovered from labour only subcontractors has a significant cost impact on the employing party.
During the transitional phase from the old style of sub-contract to the new style of sub-contract it is imperative to maximise recovery from all applicable sub-contracts where possible.