A subcontractor specialising in kitchen and bathroom refurbishments has failed in its attempt to avoid paying the Construction Industry Training Board (CITB) levy.
Dunstable-based 3D Force Ltd had argued that it should not have been subject to the levy, and had been charged too much by the CITB.
But in a hearing in Watford last month, a tribunal judgement dismissed both claims, finding “that the levy was correctly applied and correctly calculated” by the CITB.
All firms with employees who spend more than half of their time on construction activities are required to pay the CITB levy, which funds training development in the industry, particularly for smaller firms.
3D Force mainly works in the kitchen and bathroom maintenance sector, with around 60 per cent of its work coming in kitchen maintenance.
The CITB told the firm in writing in April last year that it owed £5,147, but 3D Force argued that it was “not in the category of businesses that are subject to the levy”.
The judgement, though, found that it did meet the threshold for firms that need to pay the levy, as it works in the construction sector and is an employer.
3D Force has two full-time staff and employs subcontractors to do some of its work.
“Employment in this context includes employment under a contract for services,” the judgement said, adding that “the activities of the appellant company in this case were alteration and/or repair of part of a building”, which amounts to construction work.
3D Force also argued that the CITB had incorrectly calculated its levy payments, which it said amounted to a “significant proportion” of its profit at more than 6 per cent.
The CITB calculated the amount owed by the firm based on tax paid to HMRC for subcontractor work under the Construction Industry Scheme.
However, 3D Force argued that the HMRC figure could not be used to work out the labour costs, as it sometimes related to non-labour costs, including for materials.
This argument “is beside the point in our judgment”, the tribunal found, adding that the CITB had correctly calculated the size of the levy based on those payments it saw. It accepted that the figures used by the CITB to work out the levy could have been “a rough and ready estimate of labour costs rather than a precise calculation”.
It added: “In our judgment, that is the statutory scheme.”
But the judgement noted 3D Force “unfortunately” would have had its levy payment cut by half if it had paid subcontractors around £7,000 less, under the small business levy reduction (SBLR). In total, it paid its subcontractors £407,165, and the cut-off for access to the SBLR is £400,000.
Though the appeal was dismissed, the judgement noted that the CITB had said it would be happy to discuss payment of the levy in instalments.
“We had no power to order that, but we did of course encourage the parties to speak about that possibility,” the judgement said.
The CITB was established in the 1960s as one of more than 20 industry training boards. But it is now one of just two, alongside the Engineering Construction Industry Training Board (ECITB).
In January, Mark Farmer called for a “fundamental reset” to the ITB model in his hard-hitting review of their operations.
Farmer called for the two ITBs to be merged into one, and for them to face “clear consequences” if no progress was made over the coming years.
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Joshua Stein