How do I work out the levy on payments to labour-only sub-contractors?

Employers must pay levy on payments to sub-contractors for labour-only as well as on direct employees. The employer must include the following in the Levy Return.

The total of all payments made for labour only services in the last tax year. This includes payments to all firms and people, whether or not they are registered with us. The levy is a percentage of this amount.

The total of all payments the employer receives during the same period for labour-only services carried out for other employers in the construction industry.

Employers need to show the names and addresses of other employers and the amount received. We will reduce the levy by the percentage rate which applies to labour-only payments. However, we can only reduce the levy to zero. We will not give employers a credit or carry it forward to another year if the amount allowed on the receipts is more than the levy.

Employers should declare payments before any deductions (other than pensions) for example, insurance or tax. Employers should not include VAT on the payments.

The Industrial Training Act does not give authorisation to make deductions from any amounts paid to labour-only sub-contractor or other worker.

Section 13 of the Employment Rights Act 1996 (what was Section 1 of the Wages Act 1986) says that an employer must not take amounts from his or her worker's wages unless:

• The deduction is authorised under the workers contract, or
• The worker has previously agreed in writing