How the new CITB Levy arrangements will work in 2017

Employers will no longer need to declare labour-only payments received from other employers as the offset mechanism will be removed. This offset is currently available to employers carrying out labour-only contracts for other employers in the construction industry.

It allows labour-only payments received to be offset against the Levy liability for some employers in order to prevent levy being paid twice on the same work. Removal of this mechanism will simplify the process and spread the payment of Levy more widely and, in the view of the LWP (Levy Working Party), more equitably.

Employers simply declare the total tax deducted from their sub-contractors as reported on their monthly CIS300s to HMRC, employers only need to declare payments made through the PAYE or CIS (Construction Industry Scheme) systems. No other payments will be liable to the Levy.

The Levy changes will not be implemented until 2017 (probably 6th April). This timescale will give employers notice of the change and allow them time to prepare for it in whatever way they think is best for their business.

  • One of the benefits of this system is that it is very straightforward to work out how much Levy employers will be due to pay.
  • As with the current system, you would multiply your PAYE payments by 0.5%.
  • For the Net CIS figure, take the total tax deducted from the CIS300s for the relevant year and add them together.
  • Gross this amount up by multiplying it by 5 (assuming the tax rate is still 20%) to give you the amount liable to Levy. 
  • Then multiply this figure by the Net CIS Levy rate of 1.25%
  • Add the Levy due on PAYE and Net CIS together to arrive at the total Levy due.
  • As with the current system, if your PAYE and Net CIS payments when added together are less than the Small Business Levy Exemption (£80,000) then you will not be due to pay a Levy.
  • If your total payments fall within the Small Business Levy Reduction band (between £80,000 and £400,000) then the Levy due will be reduced by 50%.

The benefit of using the CIS300 form is that this Return has already been completed for HMRC, like your PAYE records, so you don’t need to keep any additional records for CITB (Construction Industry Training Board) Levy purposes.

The advantages of using the Net paid CIS payments are that the figure of tax is very easily identified from the CIS300, the amount subjected to Levy is mainly in respect of Labour, and it is difficult to get the figures needed for the Levy Return wrong.

There may well be benefits in OBK net paid CIS clients considering applying for CIS Gross status, depending on their supply chain and we suggest an early meeting with one of our Project & Labour coordinators to revue review your CITB Levy potential liabilities.

For more information email:info@obk-llp.com

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