PAYE training levy to rise by 30%

by John d'Arcy



The Construction Industry Training Board has agreed on an increase of just over 30 per cent in the PAYE levy rate for next year.

The levy on labour-only subcontracting payments will remain unchanged. In the longer term, the levy on directly employed operatives is set to more than double over the next five years.

The board said it will implement a capping mechanism to assist those with a high proportion of directly employed labour who will be hardest hit by the levy change.

The latest meeting of the board agreed to recommend to Government that the PAYE levy rate should be increased from 0.29 per cent to 0.38 per cent for the year to 5 April 1998.

The labour-only levy stays at 2.28 per cent. First payments at the new rates will be due from 1 April 1999.

As signalled earlier this year, the levy change has been necessitated by the big swing back to direct employment. At current levy rates this threatened a £12.5 million drop in CITB income next year.

The levy increase will still not compensate in full for the return to direct employment. And the board will be drawing on £7 million from its reserves in the coming year.

On Government direction, the board is now moving in the longer term towards a single, unified levy rate by the year 2002.

Current plans are for the levy rates to be changed as follows:

l 1999: PAYE 0.38 per cent; labour-only 2.28 per cent.

l 2000: PAYE 0.5 per cent; labour-only 2.28 per cent.

l 2001: PAYE 0.65 per cent; labour-only 1.95 per cent.

l 2002: PAYE 0.86 per cent; labour-only 0.86 per cent.

l 2003: PAYE 0.87 per cent; labour-only 0.87 per cent.

As anticipated, the board is asking Government to reduce the current £61,000 annual payroll threshold below which firms are exempted from levy.