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Focus on Manufacturing

A six-figure saving?

Manufacturers could be needlessly paying a training levy.

Businesses could unfairly be paying a levy to the Construction Industry Training Board (CITB), even though they don’t meet the requirements to be classified as a construction company – potentially leading to savings far in excess of £100,000.

The CITB can impose a levy on any business that is ‘wholly or mainly’ engaged in construction, which has been interpreted by the CITB as being 50% of the company’s activities. The money raised is used to fund the facilitation and organisation of training across the construction industry.

The levy was challenged by a Sussex-based kitchen company who won a significant legal battle against the CITB – successfully arguing that it isn’t a construction firm and therefore shouldn’t have to pay a £160,000 training levy.

The company had been asked to pay £160,000 in 2017 by the CITB as it was classified as a construction firm. The company had also paid a similar amount of money to the CITB in 2016.

The company appointed expert lawyers at Irwin Mitchell to challenge the levy on the grounds that it was incorrectly classified by CITB as a construction firm and the training offered by the CITB was not relevant to its employees. Irwin Mitchell and the company together analysed their activities and reached the conclusion that the CITB’s definition of ‘wholly or mainly’ meaning over 50% was questionable, and in any event only 47% of its business should be regarded as being in the construction industry, as it used automated processes in its manufacturing.

The CITB accepted the calculations and removed the business from its register of companies required to pay the levy.

This situation won’t be unique to this particular company, and there are likely to be a number of other companies which are incorrectly classified as construction firms. As a result, these businesses will be paying the CITB large sums of money for training services they don’t use. On the other hand, the company in question plans to reinvest the £160,000 back into the business, providing relevant training for its workforce.

Our thoughts

Alex Rook, the partner at Irwin Mitchell who represented the company in the case, said: “We support the work done by the CITB and accept that as a statutory body, its purpose is to promote and facilitate training in the construction industry.

“It isn’t right, however, that it is empowered to impose a levy on companies, to finance its activity, that are not predominantly construction firms.

“We are delighted to achieve this outcome for our client and believe it is the first time a business has successfully challenged the CITB with these arguments. The business had to pay a significant amount of money every year for training that was not relevant to its needs but as a result of this case, it can now invest the money in training which is much more useful.

“This judgment is particularly significant for other businesses involved in the manufacture, supply and installation of kitchens, bathrooms and wardrobes which are subject to the CITB’s levy.

“A key consideration is whether the business uses an automated process, or undertakes activities that are not considered to be construction. Some businesses may not have considered it, or thought that it was not possible to challenge on these grounds. It is clear from this case that you can and that it is possible to achieve a very positive outcome.”

Published: April 2018

Focus on Manufacturing - Edition 7

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