Contracting Intermediaries and the CITB Levy

24 May 2019

Contracting intermediaries caught by the CITB Levy

  • In Hudson Contract Services Ltd v Construction Industry Training Board [2019] EWHC 45, Hudson’s appeals were dismissed
  • The two issues were; 1) whether Hudson is an employer in the construction industry and 2) whether Hudson has a “construction establishment”
  • Hudson engaged around 20,000 operatives per week on self-employed contracts for its small construction firm clients and only had a directly employed workforce consisting of directors and 2 members of staff
  • Due to the “labour only offset” no Levy was payable by Hudson until the calculation of the levy changed in the 2015 Levy Order
  • Hudson appealed against the assessment for £7.9m that the CITB raised following a “nil return” being submitted by Hudson

Aspire Comment

There is a misconception in the temporary labour industry that contracting intermediaries do not meet the criteria to be on the CITB register on the basis that they simply provide administration services to their construction clients (agencies or end users) such as engaging workers contractually on their behalf and dealing with all compliance issues such as Tribunal claims and CIS obligations. This case proves otherwise!

Due to the wider definition of “employee”, which includes those working under Contracts for Services, it was found that the question of whether Hudson is an employer in the construction industry falls to be determined not just by what the directly employed workforce do, but by reference to what the thousands of self-employed operatives do. The self-employed operatives are in the construction industry and so, Hudson is also in the construction industry.

Also, the purpose of the Levy is not only to provide better training of persons in employment, but for the industry as a whole, including those self-employed operatives.

Similarly, a construction establishment is a function of what its employees do, including the many thousand self-employed operatives. Therefore, whilst no physical construction activities are carried out from Hudson’s offices, it was still found to be a construction establishment engaged wholly or mainly in the construction industry.

Whilst there is no statutory requirement to volunteer yourself to the CITB, it is certainly worth considering whether, should you receive a letter through your letterbox, you will be deemed an employer wholly or mainly in the construction industry. If you are, then you will be required to pay an annual Levy of 1.25% of payments to net subcontractors and 0.35% of PAYE payments.