Navigating the CITB Levy can be a maze for UK construction employers. It’s a key part of industry funding, with specific rates applied to your PAYE and CIS subcontractors’ payments.
This straightforward guide will clarify how much levy you owe by discussing the calculation and assessment of the levy, and the rationale behind these payments, cutting through the confusion to empower you with actionable insights.
The CITB Levy applies to employers in the construction industry and is calculated based on payments to employees and CIS subcontractors, with eligibility determined by the amount of construction activity conducted by the workforce.
To determine how much levy is owed, levy rates are set for specific periods, with PAYE employees levied at 0.35% and CIS subcontractors at 1.25% on net payments after deductions; businesses can use CITB’s levy calculator to assess their contributions.
Businesses with an annual wage bill below £135,000 are exempt from the CITB Levy according to the proposed 2025 Levy Order, while those with wage bills between £135,000 and £449,999 are entitled to a 50% reduction.
The CITB Levy, governed by the Construction Industry Training Board, is a statutory levy that applies to employers engaged wholly or mainly in construction industry activities. It is calculated based on the total amount paid to employees and Construction Industry Scheme (CIS) subcontractors within the construction industry. Therefore, if your business is involved in construction, whether directly employing workers or using subcontractors, you are likely required to contribute to the CITB Levy.
This obligation to contribute to the levy is not without its benefits. The CITB Levy funds are instrumental in promoting a skilled workforce, ensuring that the construction industry is equipped to meet both current and future demands. Furthermore, it provides access to a pot of money specifically earmarked for CITB training. We will dissect the eligibility criteria for the CITB Levy in more detail.
Not every business in the construction industry is subject to the CITB levy. Whether your business is affected or not hinges on the nature of your workforce. If more than half of your workforce’s total time is occupied by construction activities, then your business falls under the umbrella of the CITB levy.
It’s vital for small businesses in particular to understand this criterion. The nature of the business’s activities, rather than its size, determines its liability for the CITB levy. This means that even if your business is small but primarily engaged in construction activities, the levy would still apply. Hence, businesses should evaluate the activities of their workforce and establish their levy status based on that.
Subcontractors play a crucial role in the construction industry, often working under the umbrella of larger construction firms. However, their status in relation to the CITB Levy depends on their designated status by HMRC. If a subcontractor has the ‘gross payment status,’ they are not subject to the CITB Levy.
This status is a designation by HMRC for subcontractors in the construction industry. It indicates that the subcontractor can receive their full payment from the contractor without any deductions for tax and National Insurance. This status benefits subcontractors significantly and directly influences the computation of the CITB Levy.
Having determined who is subject to the CITB Levy, it’s time to examine how much levy is payable. The levy rates are not static and are set for specific assessment periods. The rates for the 2023 & 2024 assessment period have been confirmed.
It’s important to note that the levy rates differ for PAYE employees and subcontractors. For PAYE employees, the CITB levy rate is set at 0.35%, while subcontractors will be assessed at a rate of 1.25% based on Net CIS deductions. We will further dissect this in terms of its implications for various types of workforce contributions.
The CITB Levy plays a crucial role in funding training and skills development in the construction industry. To determine how much levy is owed for PAYE employees, the CITB levy rate is confirmed at 0.35%. This rate is applied to the total gross taxable payments made to PAYE employees before any deductions.
In essence, it means that the levy is calculated as a percentage of the total wage bill. Despite being a relatively small percentage, given the scale of the construction industry, it constitutes a significant fund for training and development.
Subcontractors who are not under ‘gross payment status’ and operate under the Construction Industry Scheme (CIS), are also subject to the CITB levy. To determine how much levy they need to pay, their levy is calculated on their net paid CIS deductions, rather than gross payments. The levy for CIS subcontractors is calculated at a standard rate of 1.25% on the net payments that contractors make to them, after deducting CIS tax.
Furthermore, keep in mind that in levy calculations, the cost of materials is excluded from the total payments made to taxable subcontractors. This ensures that the levy is only applied to the labour portion, providing a more accurate reflection of the subcontractor’s contribution to the construction project. To make this process easier, the CITB provides a levy calculator to accurately compute the levy contributions for their CIS subcontractors.
The CITB Levy isn’t just another tax or business expense. It’s an investment in the industry’s future, supporting employers in ensuring a skilled workforce by underpinning training development within the industry. The CITB Levy grants access to education and high-quality training, a necessity for the construction industry.
The ultimate goal is to develop a competent and skilled construction workforce that can meet the industry’s current and future needs. Whether it’s addressing a skills gap, fostering new talent, or upskilling existing workers, the CITB Levy is instrumental in shaping the future of the construction industry. We will expound on this in greater detail.
One of the core uses of the CITB Levy funds is to provide high-quality apprenticeships in the construction sector. It’s worth noting that the CITB Levy funds are distinct from the Government Apprenticeship Levy and are specifically targeted for the construction industry.
By funding apprenticeships, the CITB Levy plays a crucial role in promoting construction as a viable and attractive career choice. This is pivotal in guaranteeing a constant stream of new talent into the industry, which is necessary for its enduring sustainability and growth.
The CITB Levy plays an instrumental role in the construction industry by:
Setting occupational standards
Identifying current and future skills needs within the construction sector
Ensuring that the workforce is equipped to meet evolving industry demands
The CITB uses the levy funds to support these initiatives.
Furthermore, the CITB uses the levy funds to:
Develop qualifications linked to these occupational standards
Maintain a consistent and high standard of competence across the industry
Ensure that all workers have the necessary skills to perform their roles effectively.
While the CITB Levy is instrumental in supporting the construction industry’s training needs, it’s important to consider the financial impact on businesses, particularly small ones. Small businesses may be exempt from the CITB levy if they have a low annual payroll. Furthermore, the ‘Small Business Exemption’ and ‘Small Business Reduction’ thresholds have been updated, providing potential relief for small businesses.
In the proposed 2025 Levy Order, businesses with wage bills between £135,000 and £449,999 are set to receive a 50% reduction on their CITB levy. This highlights the CITB’s commitment to supporting small businesses and ensuring that the levy does not place an undue financial burden on them. We will delve deeper into these financial considerations.
The proposed Small Business Levy Exemption ensures that businesses with a wage bill below a specific threshold will not have to pay the levy. Under the proposed 2025 Levy Order, small businesses with an annual wage bill (payroll and Net CIS) under £135,000 will be exempt from the CITB levy.
This exemption is a significant feature of the upcoming 2025 Levy Order. It provides financial relief to small businesses, ensuring that they are not unduly burdened by the levy. This means that companies with a total wage bill under £135,000 will not be required to pay the CITB levy according to the proposed exceptions.
Even if a business is not eligible for the Small Business Levy Exemption, it may still qualify for a reduction on the CITB levy. Businesses with a total wage bill between certain thresholds are eligible for this reduction. Currently, businesses with a total wage bill between £80,000 and £400,000 automatically qualify for a 50% reduction in levy rates.
The proposed 2025 Levy Order includes a Small Business Levy Reduction, offering a 50% reduction for businesses with a total wage bill between £135,000 and £449,999. This means that even if your business exceeds the exemption threshold, you may still be eligible for a significant reduction in your CITB levy, further easing the financial burden on small businesses.
As a construction employer, it’s important to stay on top of your obligations in relation to the CITB Levy. This includes ensuring that you prepare and submit your annual Levy Return to the CITB. The CITB levy return can be submitted using either an online account or via post.
While it may seem like a daunting task, the CITB has made it as straightforward as possible to submit your Levy Return. They provide a range of resources and support to help you navigate the process, whether you’re a small business owner or part of a large construction firm. One such resource is the website approved by plain, which offers valuable information and guidance. We will elaborate on this process further.
In the digital age, submitting your CITB Levy Return has never been easier. The CITB has an online platform where you can complete your Levy Return. To start the process, employers need to sign up to CITB online.
Once signed up, you can access a range of resources to assist you in completing the levy return, including a help guide and a document on calculating the wage bill. However, it’s important to ensure that you include the correct information, including the amount of CIS deductions made from subcontractors, when submitting your Levy Return.
While it’s important to prepare and submit your annual CITB Levy Return, it’s equally crucial to do so in a timely manner. The annual CITB Levy Return must be submitted by June 30 to ensure uninterrupted grant and funding payments.
Firms failing to submit their levy return by this date may face penalties, including withheld grant claims and loss of eligibility for all grant claims if the levy return is not submitted by November 30. Furthermore, if a levy return is not submitted before the Levy Assessment, an estimated assessment is issued, and the next levy assessment is scheduled for Spring the following year.
To ensure the accuracy of levy returns, the CITB may contact firms for verification.
The CITB Levy is more than just a statutory obligation. It’s a tool that construction employers can leverage for their business. The CITB Levy supports a range of initiatives, from training and development to careers and qualifications, all aimed at fostering a skilled construction workforce.
In 2021-2022, construction employers, ranging from micro to large companies, received allocations of levy funds specifically earmarked for support training development purposes under the Industrial Training Act. This demonstrates the tangible benefits that the CITB Levy can bring to your business.
We will further discuss how you can utilise the CITB Levy to benefit your business.
One of the key benefits of the CITB Levy is the access it provides to training funds. Construction employers registered with the CITB and who are up to date with their levy payments can apply for grants, which are awarded upon completion of accredited CITB approved training courses.
These grants can cover a range of construction-related training, including skills like:
access and rigging
asbestos removal
building maintenance
carpentry and joinery
demolition
For specific training, such as Supervisor NVQs, the CITB provides grant amounts up to £1,250. This means that the CITB Levy can directly contribute to improving your workforce’s skills and capabilities.
Beyond accessing funds for training, the CITB Levy can open doors to other valuable resources and support. One such opportunity is becoming a member of BITC The Prince’s Responsible Business Network. Joining BITC offers businesses resources and support for adopting responsible business practices.
Membership in the Prince’s Responsible Business Network provides support in developing business strategies focused on fairness and sustainability, as well as investment in workforce and community development. This aligns perfectly with the objectives of the CITB Levy, making it a valuable opportunity for businesses in the construction industry.
In conclusion, the CITB Levy is a vital instrument for the construction industry, supporting training, development, and the fostering of a skilled workforce.
Whether you’re a small business owner or part of a large construction firm, understanding the CITB Levy, its rates, eligibility criteria, and how to leverage it for your business is crucial. With the right knowledge and resources, the CITB Levy can be more than just a statutory obligation - it can be a powerful tool for growth, development, and success in the construction industry.
Employers engaged wholly or mainly in construction industry activities, including businesses with employees or subcontractors, have to pay the CITB Levy.
The CITB levy rate for PAYE employees is 0.35%, and subcontractors will be assessed at a rate of 1.25% based on Net CIS deductions. These rates apply for 2023 and 2024.
Yes, small businesses with an annual wage bill under £135,000 will be exempt from the CITB levy under the proposed 2025 Levy Order.
You can submit your annual CITB Levy Return using either an online account or via post.
The CITB Levy offers benefits such as supporting training and development, fostering a skilled construction workforce, and providing access to training funds and grants for construction-related training. This can greatly benefit your business by enhancing the skills and qualifications of your workforce.
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Published on 30 May 2024 By Gary Holland
Chartered Health and Safety professional, with extensive knowledge of creating and implementing health and safety, environmental and quality management systems to ISO 9001, ISO 14001 and OHSAS 18001 / ISO 45001 standard.
Experience in working with a number of high profile clients in demanding and high-risk industries, including; Utilities, Construction, Manufacturing, Renewable Energy (offshore and onshore wind), Defense, Nuclear and Public sector.
I am able to understand client’s needs and expectations and deliver projects to high standards, implementing best practice above compliance.
