Appeal court confirms that payroll firm is a construction contractor

payroll

March 11, 2020 –  A long-running battle between payroll services provider Hudson Contact Services and the Construction Industry Training Board appears to have ended in victory for the CITB.

Hudson Contact Services and the CITB have been at loggerheads since 2014 over the payroll firm’s levy liability.

An employment tribunal ruled in 2018 that Hudson Contract Services was liable to the CITB levy. Hudson has twice appealed this ruling and has now twice been turned down.

A ruling from the Court of Appeal today – 10th March 2020 – dismissed Hudson’s latest appeal against having to pay the levy. But it also said that the CITB would have to consider a £10.5m grant claim submitted by Hudson in 40 cardboard boxes last month after its previous court defeat.

Liability to levy by the board is imposed by the Industrial Training Act 1982 on an ‘employer in the construction industry’ and is assessed in relation to each ‘construction establishment’ of the employer ‘engaged wholly or mainly in the construction industry’ during the relevant period, the latest judgment explains.

Hudson contends that it is not an employer in the construction industry because neither it nor its direct employees carry out any construction work, and nor does it take any construction risk.

Hudson argues that it just provides payroll services, in essence helping freelancers with their books. Under current law, however, the 20,000 or so self-employed construction operatives on its books must be regarded as employees, both the original tribunal and subsequent appeals ruled.

The original tribunal ruled that: “Hudson has ‘a construction establishment’ because the self-employed operatives work wholly or mainly in the construction industry and Hudson contracts with those employees from its head office, and they are paid from the head office.  Accordingly, the construction industry activities take place from its head office at Bridlington.”

The Appeal Court today upheld that judgment. “Hudson is after all a sophisticated form of labour-only subcontractor, on terms that remove risk in relation to construction activity,” Lord Justice Underhill said.

The CITB welcomed the unanimous judgment of the Court of Appeal and spokesman Mike Hobday said: “The levy due from Hudson in this case will enable CITB to invest in skills for the future of the construction industry. We have for some time invited Hudson to submit a grant claim for any construction-related training that they identify, organise and fund. CITB will of course consider the new claim in accordance with the scheme rules.”

CITB pointed out that Hudson Contract Services’ 2019 annual accounts state that it has CITB levy assessments for the financial years 2016, 2017 and 2018 totalling more than £27.4m.

Last month Hudson Contract Services retaliated to its previous court defeat by serving CITB with a £10.5m grant claim, the biggest in the history of the levy, it says.

Hudson managing director Ian Anfield said: “The long-running dispute with CITB, which started in 2014, has veered from the sublime to the ridiculous. The latest judgment opens up the prospect of Hudson Contract Services Ltd, which had a staff of 30 payroll and auditing employees, becoming the largest levy payer since CITB was set up in the early 1960s.

“The levy at the centre of this dispute is for 2016 and amounts to £7.9m. This would be double the levy typically paid by a major contractor if it ever falls due.

“The judgment also forces CITB to assess a protective grant claim of £10.5m for the same year, which was delivered on two pallet trucks in February.”

Mr Anfield insisted that the battle was not over and he would appeal again. “We don’t know exactly how or when this dispute will end,” he said. “We will either be found to be out of scope at the next round of appeal, or there will be an offset of grant against levy which could itself involve the courts. But we do know that CITB has lost its way since I attended its training college at Bircham Newton in 1990 as a Balfour Beatty apprentice.

“CITB no longer delivers training, has nothing to do with CSCS cards and spends millions of pounds of levy payers’ money on itself and activities that are questionable at best.Ultimately, if CITB had half of the industry support it claims to have, we would have just added the levy to our fees and clients would have been happy to pay.

“However, the reality is the vast majority of Hudson Contract Services Ltd’s 2,000 SME clients saw no value in CITB and we took this stand on their behalf.”

The Hudson Contract group completed a restructuring in 2018, effectively capping off the issue and making it an historic one, he said.

Mr Anfield said: “While we have far more important issues to deal with for clients of our other businesses – such as IR35 and reverse charge VAT – the CITB dispute will rumble on in the background for as long as it takes to achieve the correct result.”

Source:-https://www.theconstructionindex.co.uk/news/view/appeal-court-confirms-that-payroll-firm-is-a-construction-contractor

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