07.03.11 CITB Levy applies to labour supplied through CIS Intermediary

CITB Levy applies to labour supplied through CIS Intermediary

In the recent employment appeal tribunal between The Construction Industry Training Board (CITB) and Beacon Roofing Limited (Beacon), the Employment Appeal Tribunal (EAT) confirmed that payments in respect of labour-only subcontractors supplied through a CIS intermediary are subject to the CITB Levy.  This case will have a serious financial impact on construction companies which use CIS intermediaries as a way of managing the risks associated with self-employment.

For those who are new to the levy, CITB provides training for those who work in the construction industry and in order to fund this training construction companies are required to pay a levy upon the amount of their wage bill for direct employees and labour-only subcontractors.

Summary of the case

Beacon had amended its contracting procedures so that its self-employed contractors were engaged under contracts for services by Hudson Contract Services Limited (Hudson).  This arrangement meant that Hudson took responsibility for the engagement of the subcontractors together with the administration of the Construction Industry Scheme (CIS) in return for a weekly fee payable by Beacon.

Following a CITB inspection, Beacon was presented with an assessment in the sum of £15,211 in respect of unpaid levy in relation to payments made to Hudson for labour-only subcontractors and subsequently appealed against this assessment.

Initially, the Employment Tribunal found that Beacon had entered into the contract with Hudson so that it would be relieved of the administrative and clerical work involved in complying with the requirements of the CIS.  As a result, the Levy was not payable despite the fact that the main payment to Hudson related to the provision of the labour.  

The CITB subsequently appealed and the matter was heard before the EAT.   Whilst the original hearing held that Beacon had entered into the contract only to procure the additional administrative service that Hudson was offering, the EAT decided that Beacon was, in fact, paying for both the services of the operatives and the administrative service Hudson provided. 

As a result, the assessment was upheld as Beacon was said to be arranging for the furnishing of labour in carrying out construction operations and was regarded as paying for a “labour-only agreement” as defined in The Industrial Training Levy (Construction Industry Training Board) Order 2009.

A full transcript of the case can be viewed at: http://www.bailii.org/cgi-bin/markup.cgi?doc=/ew/cases/EWHC/Admin/2011/14.html&query=hudson+and+beacon+and+roofing&method=boolean