The CITB has an important function within the construction industry, cultivating talent and encouraging the development of essential skills for the sector in England, Scotland and Wales.
On 1 March, the CITB started a consultation on its proposed levy for the period from 2022 to 2025 which closes on 11 April 2021. Employers in the industry should consider taking part in the consultation as it provides an opportunity to give feedback on the levy proposals.
Purpose of the levy
The Industrial Training Act 1982 empowers the CITB to impose a levy on employers ‘engaged wholly or mainly in construction industry activities’. A full list of what constitutes a ‘construction industry activity’ can be found here. Employers who fall within this category must register with the CITB and complete a Levy Return form every year.
The CITB uses the funds it collects from employers to build upon and develop the training and delivery of skills within the construction industry. The CITB is required to consult the industry employers every three years to set out how it proposes to use the levy funds for the following three years.
Calculating the levy
How much levy an employer pays is calculated using its total wage bill and the Levy Return form details the number of employees on their payroll and the scale of their wage bill. Levy Return forms can be completed online or by post after an employer registers with the CITB and are normally received in the Spring of each year.
After completing the Levy Return form, employers then receive a Levy Assessment Notice from the CITB explaining whether there is a levy to pay, the amount to pay and the deadline by which this needs to be paid.
2018-2020 levy rates
For 2018-2020, levy rates were at 0.35% of sums paid to employees on the payroll and 1.25% for Net CIS subcontractors.
Further, small businesses would benefit from a 50% levy reduction if their wage bill fell between £80,000 and £399,000.
During this period, employers paying less than £80,000 each year on the wages/payments of PAYE employees and CIS-registered operatives would be exempt from paying the levy.
Proposed 2021 levy rates
Following the outbreak of COVID-19, the CITB Board proposed that for 2021, the levy rates above would be reduced by 50% to 0.175% for PAYE and 0.625% for Net CIS Sub-Contractors.
The small business levy reduction would remain at 50% for employers with wage bills between £80,000 and £399,000.
The levy exemption threshold would also be increased from £80,000 to £120,000 allowing a greater number of small enterprises to benefit from the exemption.
The CITB has proposed that these measures remain in place for 1 year to help employers recover from the impact of Coronavirus. These Proposals for the 2021 Levy Order are currently with the Department for Education. Whilst it is not immediately clear when Parliament is expected deliver its verdict on the Proposals, the Proposals were submitted to Parliament in September 2020 so a response should be provided soon.
Consultation and Consensus on 2022 – 2025 levy
The Levy Strategy Committee (LSC) has proposed that the levy for 2022-2025 should mirror the 2018-2020 rates (0.35% PAYE and 1.25% for Net CIS subcontractors).
Furthermore, the LSC has proposed that the small business levy exemption threshold remain at £120,000 and the small business levy reduction remain at 50% for employer wage bills between £80,000 and £399,000.
The CITB forecasts that over the next four years, the levy will be reduced by over 30% compared to pre-COVID-19 levels.
Key dates
The consultation started on 1 March 2021 and closes on 11 April 2021. After the consultation, the CITB will use the employer feedback to finalise its levy proposals.
The CITB will then launch a “consensus” period starting on 14 June 2021 and finishing 15 August 2021 to establish industry support for a new Levy Order.
The CITB will then submit the results to the Department for Education. If the results show that a majority of employers support the Levy Proposals, the Government will make a new Levy Order.
Consultation eligibility requirements
Employers must be registered with the CITB to take part in the consultation and employers exempt from the levy should note that they are not eligible to take part in the consultation.
The consultation survey can be accessed at the following link: CITB Levy 2022-25 Consultation – Construction Industry Training Board – Citizen Space
For more information on how the levy can affect your construction project contact a member of our Construction & Engineering team.