Legislation

The Apprenticeship levy was introduced in 2017 as part of Government’s drive to create an additional 3 million apprenticeships. It applies to all sectors of industry, but controversially applies in parallel with the CITB levy in Construction. You must pay the Apprenticeship levy if your pay bill is greater than £3M per year. The pay bill is defined as the earnings you pay that are liable to class 1 national insurance contributions. The levy is payable at 0.5% of the total pay bill (i.e. not just the element over £3 million) minus an annual “levy allowance” of £15,000.

The Construction Industry training board has been in existence since 1964 with the sole purpose of providing or facilitating training for the construction industry, with construction employers paying a statutory levy to fund the CITB on payroll bills for both employees and CIS registered sub-contractors of over £80,000 a year. The Levy is calculated as 0.35% of PAYE and 1.25% of payments to sub-contractors paid under deduction within the CIS. There is a small business reduction for businesses with a payroll bill of between £80k and £400,000, with additional temporary reductions having been put in place for the Covid pandemic. The CITB has frequently been the subject of industry criticism over its performance, for funding of inadequate or inappropriate training, or failing to understand the needs of the industry.

The Modern Slavery Act obligates all UK businesses that provide goods or services with a turnover greater than £36M to publish a statement on their policy towards monitoring, reporting and preventing modern slavery. Even if a company does not meet the required turnover threshold for publishing a statement, it is good practice to implement and actively consider the requirements of a Modern Slavery Act policy. Additionally, EEBS are voluntary members of the GLAA (Gangmasters & Labour Abuse Authority) Construction protocol.

From the 1st January 2021 all workers who are not already permitted to work in the UK must comply with the points-based system to receive a work permit. European citizens who hold settled status, pre-settled status or who hold a frontier workers permit will have been issued with a residency permit, and failure to ensure that your tradespeople have the right to work can lead to significant fines and penalties.

There has been a massive increase in HMRC’s focus on supply chain compliance in the last few years. Much of the activity has focused on denying contractors input VAT when suppliers have gone bust and the VAT has not been paid. Indeed, the domestic reverse charge scheme has been introduced to further stem this loss of revenue. Companies must have due diligence policies in place to mitigate any potential loss of emolument to the Revenue, but HMRC will not give you a definitive list of what the policy should contain, relying on the “Kittel Principle” that companies know, or should have known what is expected!

This is in addition to the demands of the Criminal Finances Act, which is Government’s attempt to improve their powers and abilities to tackle money laundering, corruption, tax evasion and terrorist financing. Although tax evasion and its facilitation is a well-established criminal offence, it has always been difficult to attribute criminal liability to the corporation. Part 3, section 45 of the 2017 Act contains a new corporate offence for failing to prevent tax evasion. It is therefore necessary for companies to have reasonable procedures in place to have a valid defence if a person acting on their behalf commits an offence of aiding or facilitating the evasion of tax.

Far reaching changes to the laws governing payments through intermediaries were introduced under the title of “Onshore Intermediaries Legislation” in 2014, and apply to how payments to individuals are taxed when paid through ANY type of intermediary – including a traditional agency supplier, a payroll provider or an umbrella company. The legislation was proposed and implemented very rapidly and with little consultation and, whilst receiving a degree of publicity at the time, it has passed into law without much attention.

The legislation disregarded the traditional definition of an employment relationship, and required all intermediary suppliers to operate PAYE on all payments made to individuals unless they could prove they were not subject to a new test of direction, supervision or control. To give this new legislation financial teeth a debt transfer provision was included: this meant that financial liability for deduction of PAYE was extended up and down the contractual chain with end-users potentially being ultimately held personally liable for omissions or failures of intermediate contractors.

The biggest concern for us is that large numbers of contractors, especially those with long standing agency supply arrangements, are still not aware of the potential risks posed by regulations, or have been provided with a perfunctory, ill-informed response by their supplier. This is particularly concerning, as the transfer of debt provision has the potential to make individual business owners personally liable for business tax bills they did not know existed.

BE AWARE: The regulations require contractors to demonstrate they have actively considered the appropriateness of any arrangement, concentrating on supervision, direction or control (SDC), and a simple declaration often provided by your existing supplier but signed by you, confirming that your tradesmen are self-employed is most definitely not good enough!