MJL Construction Associates Ltd v CITB: 3300651/2024
EMPLOYMENT TRIBUNALS
Case No 3300651/2024
Between
MJL Construction Associates LtdClaimantCITBRespondent
Before
Employment Judge KJ PalmerDate 10 November 2025
JUDGMENT
That Mr L Blay be removed as Claimant in these proceedings and replaced as Claimant by MJL Construction Associates Limited. Approved by:
REASONS
[1]This is an appeal against the 2021 and 2022 Levy Assessment Notices (“LANs”) imposed by the Respondent in accordance with The Industrial Training (Construction Industry Training Board) Order 2021 (“the 2021 Levy Order”), and The Industrial Training (Construction Industry Training Board) Order 2022 (“the 2022 Levy Order”).[2]Following a Levy Verification, the 2021 and 2022 LANs were raised by the Respondent in the sum of:• 2021 Levy - £13,161 (£6,091.27 o/s) raised under the 2021 Levy Order• 2022 Levy - £15,822 (£15,822.00 o/s) raised under the 2022 Levy Order.[3]The amounts of the Levy outstanding correspond to the amounts imposed in respect of what the Appellant calls net paid “bona fide subcontractors”, that is to say net paid subcontractors who are also employers.[4]The claim form was lodged on 18 January 2024 and the grounds of appeal were subsequently confirmed at a Preliminary Hearing on 11 August 2025 as being as follows: Case Number: 3300651/2024 (CVP) 2 of 7(i) Lack of places for face to face apprenticeship training courses;(ii) The standard and format of apprenticeship training available;(iii) The distance from the Appellant to a training centre;(iv) Whether the Appellant has been correctly assessed on the subcontract (Net CIS element) of the Levy; and(v) Perceived lack of training and support[5]In its written submissions the Respondent submitted that only (iv) was a valid ground of appeal. At the hearing, Mr Blay accepted that, but stated that he wanted to complain about the system and how he believes it is failing.[6]The issue before the Tribunal was therefore whether the Respondent had been correct to impose a Levy on the Appellant in respect of net paid bona fide subcontractors, namely employers in their own right. Statutory Background[7]The Respondent is one of a number of Industrial Training Boards (“ITBs”) established pursuant to s.1(1) of the Industrial Training Act 1982 (“the 1982 Act”) “for the purpose of making better provision for the training of persons over compulsory school age…for employment in any activities of industry or commerce…”. To this end, s.5 of the 1982 Act gives ITBs the power to carry out various activities “for the purpose of encouraging adequate training of persons employed or intending to be employed” in the activities with which they are concerned.[8]In order to fund its activities the Respondent is empowered, pursuant to s.11(2) of the 1982 Act, read with, in particular, article 2(1)(h) of the 2021 and 2022 Levy Orders, to impose a Levy on “employers in the construction industry”.[9]It is common ground between the Appellant and the Respondent that the Appellant is an employer in the construction industry and therefore required to be registered and liable to annual Levy assessment.[10]“Employee” is defined in s.1(2) of the 1982 Act as including “a person engaged under a contract for services” and for the purposes of the Levy the meaning of “employer” is construed accordingly.[11]Importantly this means an employer’s subcontracted workforce are considered to be “employees” for Levy purposes, whether they are engaged as individuals or companies.[12]For the purposes of the 2021 and 2022 LANs the Levy was assessed in accordance with articles 7 of the 2021 and 2022 Levy Orders which state: “The amount of levy to be assessed in respect of each construction establishment for each levy period is— A+ B where A is an amount equal to 0.175% [= 2021 Levy Order / 0.35% = 2022 Levy Order] of all emoluments (other than the relevant part of all contract payments) which have been paid or are payable by the employer to, or in Case Number: 3300651/2024 (CVP) 3 of 7 respect of, persons employed by the employer at or from the construction establishment during the relevant base period; and B is an amount equal to 0.625% [= 2021 Levy Order / 1.25% = 2022 Levy Order] of the relevant part of all contract payments made by the employer to, or in respect of, persons employed by the employer at or from the construction establishment during the relevant base period.” (italics added)[13]“A” concerns wages paid by the employer to PAYE employees and is not relevant to the present appeal.[14]“B” concerns the relevant part of contract payments made by the employer to subcontractors and is relevant to the appeal. In this respect “relevant part” and “contract payment” each have particular definitions.[15]In accordance with article 7(2) of the 2021 and 2022 Levy Orders a “contract payment”: “…has the meaning given to it by section 60 of the Finance Act 2004”[16]Section 60(1) of the Finance Act 2004 (“Finance Act”) defines “contract payment” as: “…any payment which is made under a construction contract and is so made by the contractor … to:(a) the sub-contractor(b) a person nominated by the sub-contractor or the contractor, or(c) a person nominated by a person who is a sub-contractor under another such contract relating to all or any of the construction operations.”[17]Save that, however, s.60(4) broadly exempts from the definition of a contract payment (and hence from the Levy assessment) any payments made to a person who is registered for “gross payment”.[18]The meaning of the “relevant part” of a contract payment is defined at article 7(3) of the 2021 and 2022 Levy Orders by reference to the “Construction Industry Scheme” (“CIS”), which is a scheme designed to promote and ensure compliance with obligation to pay income tax within the construction industry and is set out, inter alia, in s.61 of the Finance Act 2004. In this respect article 7(3) of the 2021 and 2022 Levy Orders provides: “The relevant part of a contract payment is the part of the contract payment in respect of which the relevant percentage is applied for the purpose of section 61 of the Finance Act 2004”. (italics added).[19]Section 61(1) of the Finance Act 2004 provides that: Case Number: 3300651/2024 (CVP) 4 of 7 “On making a contract payment the contractor must deduct from it a sum equal to the relevant percentage of so much of the payment as is not shown to represent the direct cost to any other person of materials used or to be used in carrying out the construction operations to which the contract under which the payment is to be made relates.”[20]For the purposes of CIS, where a subcontractor is registered with HMRC as “net paid”, employers must deduct 20% (i.e. the relevant percentage) of the payment made under the contract that is not the cost of materials, which is then held on account of that subcontractor’s tax liability.[21]For the purposes of the Levy, the above provisions have the effect that an employer in the construction industry:(i) is liable to pay the Levy in respect of contract payments to “net paid” subcontractors because of the definition of employee in s.1(2) of the 1982 Act as including subcontractors and the definition of contract payment in section 60(1) of the Finance Act;(ii) is not liable to pay the Levy in respect of contract payments to “gross paid” subcontractors because of their exemption from the definition of contract payment in s. 60(4) of the Finance Act; and(iii) is liable to pay the Levy on only the labour element of the contract payment and not the direct cost of materials because of the definition of the “relevant part” (of the contact payment) in article 7(3) of the 2021 and 2022 Levy Orders and s.61(1) of the Finance Act. Levy Appeals[22]Pursuant to ss.12(4) and 12(5) of the 1982 Act: “(4) A person assessed to levy imposed under a levy order may appeal to an employment tribunal Page 70 of 265 and the levy order shall make provision as to the time within which such an appeal may be made. (5) On an appeal under subsection (4) above –(a) if the appellant satisfies the tribunal that he ought not to have been assessed to the levy or ought to have been assessed in a smaller amount, the tribunal shall rescind or, as the case may be, reduce the assessment but (subject to paragraph (b) below) in any other case shall confirm it; and(b) if it appears to the tribunal that the appellant ought to have been assessed to the levy in a larger amount, the tribunal may increase the assessment accordingly.” Submissions Case Number: 3300651/2024 (CVP) 5 of 7[23]Mr Blay argued that the Appellant company shouldn’t be paying a Levy in respect of bona fide subcontractors, that they should be paying the Levy themselves as they were employers employing their own employees. It was for the Respondent to collect the Levy directly from those employers rather than from the Appellant. Further and in any event, the situation was confused and it was now too late for the Appellant to pass on the costs of the Levy in respect of bona fide subcontractors for 2021 and 2022 to those subcontractors or the consumers. Mr Blay also argued that the knowledge of the Levy in the construction industry was patchy to say the least which meant that many companies who should be paying a Levy were not doing so which, in turn, meant the Levies were higher than they would otherwise be if the Levies were applied properly.[24]Mr Byrne admitted that there was no obligation on employers in the construction industry to make themselves known to the Respondent. However, 74,000 employers were registered with the Respondent and the Respondent had engaged a research business to identify which companies met the criteria for registration and should be registered. It was clear from the legislation that the Appellant was obliged to pay the Levy in respect of net paid bona fide contractors; in that respect it was not a question of the Appellant paying the Levy on behalf of those contractors because in many cases they should also be paying a Levy themselves by virtue of being an employer in the construction industry (as well as also being an employee of the Appellant).
Conclusions
[25]It appears that the application of the Levy scheme is characterised by an element of randomness, in that it appears that “employers in the construction industry” are not under any obligation to identify themselves to the Respondent and therefore there are many such employers who are not paying Levies. I can therefore understand why the Appellant considers that it is unfair that it should be required to pay Levies when other similar companies are not doing so.[26]Nevertheless, the statutory scheme which I have to apply is clear: the Appellant is an employer in the construction industry and has to pay the Levies laid down by the legislation in respect of payments to its employees, which for these purposes include contract payments to net paid subcontractors regardless of whether or not those subcontractors are also employers.[27]In this respect the Appellant is not paying the Levy that would otherwise be payable by the bona fide subcontractors, those bona fide subcontractors that are also employers in the construction industry should be CITB Levy registered and also paying the Levies in respect of payments made to their direct employees and subcontractors. Indeed this has the potential to result in the Levy being imposed more than once on the same piece of work. This double Levy concern was addressed - and dismissed - in the case of Hudson Contract Services Ltd -v- The Secretary of State for Business, Innovation and Skills [2016] EWHC 844 (Admin). In that case Mr Justice Kerr held at paragraph 111 that: Case Number: 3300651/2024 (CVP) 6 of 7 “There is no double taxation in the extreme sense, i.e. where a person is taxed twice in respect of the same subject matter. There is an element of double or multiple recovery in that levy payments must be made in a significant number of cases by more than one person in respect of the same subject matter. But no one has to pay the levy twice over for the same work.”[28]In any event, here the Appellant’s concern does not appear to be double payment of the Levy, but the fact that it is paying the Levy while others are not doing so. However, while I understand the Appellant’s complaints about the unfairness of the system, this is not an argument that can have any traction in this jurisdiction. The only question for me is whether (pursuant to the statutory scheme set out above) the Appellant ought not to have been assessed to the Levy imposed (or ought to have been assessed to a smaller amount), and it is clear the Respondent was correct to impose on the Appellant a Levy in respect of contract payments to net paid bona-fides subcontractors.[29]Further, the fact that the Appellant was confused by or didn’t appreciate the scope of the Levy, so that the costs of the Levy have not been passed on by it to the net-paid bona fide subcontractors, is not a defence.[30]As regards the quantum of the Levy due, the Respondent’s position is that the total amount of Levy outstanding in respect of the 2021 and 2022 LANs is £21,913.27.[31]The Appellant calculated the sum as being £21,659.00, which is a difference of £254.27.[32]On investigation, Mr Byrne informed the Tribunal that while the Appellant had made a particular payment of £915.00 towards the 2021 LAN, £254.27 of that amount had in fact been allocated to an amount outstanding in respect of the Appellant’s obligations under the 2020 LAN.[33]Accordingly, I am not satisfied that the lower sum of £21,659.00 calculated by the Appellant is correct and find that the total sum owed is indeed £21,913.27[34]Mr Blay further drew attention to the fact that in February 2024 the Appellant had been awarded a grant by the Respondent of £3,500 (in respect of the successful completion of an employee’s training) which it has not yet claimed and argued that this sum should be set off against what is owed under the LANs[35]I have no power to set off the grant against the Levy Assessments, however I record that Mr Byrne stated that while he had no knowledge of the grant, he couldn’t see any reason why the Respondent wouldn’t set off that sum once there was agreement from the Appellant on the Levy amounts owed.[36]In the light of the above the appeal is dismissed and the 2021 and 2022 Levy Assessment Notices are confirmed in the total sum of £21,913.27. Case Number: 3300651/2024 (CVP) 7 of 7 Approved By: