Hudson Contract’s sudden switch to gross payment status took everyone by surprise – ourselves included. Frankly, we had not anticipated that HMRC would process our application within just a few days, and we received our notification letter a week later. . . so on the positive side, since one of the gross payment tests is tax compliance, HMRC is clearly happy with ours.
Before I go any further, a massive thank you to our clients for the understanding and co-operation shown during the rapid transition. And, to add that should paying gross cause you any serious cashflow issues, please get in touch, as we have an alternative business model that might be more advantageous.
As you know, the driver behind Hudson Contract’s move to gross status was the CITB’s 2015 Levy Order which became law in April, under which construction firms can be charged 1.25% on net paid subcontractors, but nothing on gross paid subcontractors.
After first saying Hudson Contract was outside the scope of the levy, the CITB changed its mind, and now seems unclear on whether Hudson Contract is within scope to be charged with the levy. As you would expect, we are vigorously resisting any such attempt – and have already taken the initiative with a legal challenge that may see the levy changes overturned.
An organisation that has forgotten its purpose?
Meanwhile, the CITB seems to have completely lost its way, to the point of forgetting why it exists at all.
Like many back office-heavy organisations, it has become bloated and self-serving. Half the levy gathered goes on administration – which includes a board of directors, none with any real trade or industry experience, paying themselves six figure salaries. They continuously tweak the rules, to take more from small and medium sized businesses while paying millions of pounds to (and taking less from) major contractors.
The CITB has tried to sell its changes on simplification, but if they genuinely wanted to simplify – or if they properly understood the industry – it would surely have removed the strange time-lag between work done on site, levy return completed, levy payments and grant applications. There would also be a greater emphasis to ensure those who pay the levy actually have access to the training and support that they need.
Guidance for the future
As it stands, Hudson Contract clients won’t face a levy when the bill for 2015 lands in 2017. (Other construction companies registered with the CITB will notice these costs on next year’s levy return and be obliged to pay in 2017.) However, should the 2015 Levy Order be scrapped, and the old rules reintroduced, you may be asked to pay on labour-only payments as before. We suggest you make provision, just in case.
Our position is that the CITB has changed the rules, meaning our clients no longer pay a levy on Hudson Contract. Hudson Contract is beyond the scope of the levy, as it always has been.
Unless and until the CITB accepts we are out of scope, we remain determined to have its ill thought-out and unnecessary changes overturned, although this could take more than a year to resolve, as the wheels of justice turn very slowly.