CITB Levy – the new Levy Order

The Construction Industry Training Board (CITB) works with construction companies to support the development of skills and training within the UK construction industry. To finance the training, the CITB levies a charge to those employers who operate ‘wholly or mainly’ within the construction industry.

The current training levy is changing. The latest Levy Order, which will be implemented in 2016, will see the collection of the levy from companies, other than construction companies, who operate within the construction industry (such as agencies or umbrella companies). This will be calculated at 0.5% of payments where PAYE has been deducted, for CIS payments the calculation is as follows:

  • Take the Total Tax Deducted figure from your CIS300 form.
  • Gross up this figure (divide by 20 and multiply by 100)
  • Apply the 1.25% levy to determine the liability due.

What this means financially for our Agencies and Contractors clients?

The CITB levy is a crucial financial and commercial factor to be aware of in the construction industry.

Example scenario:

Agency A1 is engaging with 100 Single Person Limited Companies, which each gross £1,000 per week, and the agency is making the 20% CIS tax deduction. The annual CITB liability will be as follows (based on a working year of 48 weeks):

  • 100 x £1,000 = £100,000 (total gross payment per week)
  • £100,000 x 20% = £20,000 (total weekly CIS tax deducted)
  • £20,000/20 x 100 = £100,000 (total weekly ‘grossed up’ figure)
  • £100,000 x 48 = £4,800,000 (total annual ‘grossed up’ figure)
  • £4,800,000 x 1.25% = £60,000 CITB Liability

Agency A1 also employs 250 temporary operatives, which each gross £500 per week. The appropriate Taxes are deducted and all payments and deductions are reported via Real Time Information (RTI). The annual CITB liability will be as follows (based on a working year of 48 weeks):

  • 250 x £500 = £125,000 (total gross payment per week)
  • £125,000 x 48 = £6,000,000 (total annual gross payment)
  • £6,000,000 x 0.5% = £30,000 CITB Liability

 

By engaging the services of the OBK Group, Agency A1 could save the total £90,000 annual levy. If you would like to discuss this in greater details, please contact Jay Pittaway on 07779 705451 or email jay.pittaway@obk-group.com

 

Client Contractor B2 is engaging 300 CIS subcontractors, which each gross £700 per week and the Client Contractor is making the 20% CIS tax deduction. The annual CITB liability will be as follows (based on a working year of 48 weeks): 

  • 300 x £700 = 2100,000 (total gross payment per week)
  • £210,000 x 20% = £42,000 (total weekly CIS tax deducted)
  • £42,000/20 x 100 = £210,000 (total weekly ‘grossed up’ figure)
  • £210,000 x 48 = £10,080,000 (annual CIS tax deducted)
  • £10,080,000 x 1.25% = £126,000 CITB Liability

 

By engaging the services of the OBK Group, Agency A1 could save the £126,000 annual levy. If you would like to discuss this in greater details, please contact Jay Pittaway on 07779 705451 or email jay.pittaway@obk-group.com