The Construction Industry Training Board (CITB) currently imposes a levy on employers or contractors in the construction industry to fund its operations, which is promoting vocational training within the industry.
Historically, many contractors recoup the levy from subcontractors by making a deduction from the ‘Gross amount of payment’ which is shown on a contractor’s monthly return.
However, this practice has been reviewed and HM Revenue and Customs (HMRC) has concluded that it can no longer be supported as it is not part of the current or past CIS legislation.
This will impact upon the amount payable to the subcontractor, adding cost to the supply and also has implications for VAT as the value of the subcontractor’s supply for VAT purposes will not be reduced by CITB levy deductions in the future.
This change will be effective from 6th April 2014. HMRC proposes to amend its guidance in booklet CIS340 from April 2014 to remove all references to the practice. Businesses must ensure this change is reflected in any CIS payroll software.