A payroll firm involved in a long-running dispute with the Construction Industry Training Board (CITB) over £8m of levy payments has lost large parts of its latest legal battle.
In 2018, the CITB assessed that Hudson Contract Services (now known as Knot Builders) owed £27.4m (later revised to £7.96m) in levy fees for the three prior financial years, as it is effectively a construction company. Hudson also lost a March 2020 employment tribunal appeal decision on the issue and was denied an attempt to appeal in the Supreme Court in November of the same year.
Hudson issued a claim for £28.1m in CITB grants, covering the same period – arguing that if it was considered a construction company, it was eligible for the grants.
However, High Court judge Mrs Justice Ellenbogen dismissed two of the three arguments put by Hudson Contract Services, including that as it is considered a construction employer it must be eligible for the grants it sought, as she said it decides its own business model and whether that includes a training function.
She did rule that the firm may be eligible for some grant money, covering 2015/16 in two out of six areas claimed for – inductions for new starters and site audits during which operatives received workplace training.
The CITB said the ruling was “substantively in its favour” and that it will appeal the ruling on the two areas in which the judge said it should reconsider the grant applications, Construction News understands.
After the ruling, the CITB said in a statement that it is the “custodian” of the construction industry levy and had to apply a “fair, consistent and level playing field” when collecting the levy and distributing funding.
“Knot Builders’ continued attempts to avoid its levy liability and then to claim £28m of grant in a claim that has been substantively dismissed has resulted in three years of litigation at the expense of the industry,” a spokesperson said.
“The funding protected by CITB by this ruling will enable CITB to further invest to support the construction industry to have a skilled, competent and inclusive workforce now and in the future.”
Ian Anfield, managing director of Knot Builders’ parent company Hudson Contract Limited, said it was unclear how much the grant money should be. He added: “The facts of the case are that KBL [Knot Builders Ltd] is not liable to pay the levy until a grant offset is finalised. That offset could range from zero to near £30m depending on lots of factors. KBL has always been clear that its desired outcome would be cost neutral.
“Ultimately KBL should never have been dragged into the levy and it should not have had to go to court to be given access to the grant scheme.”
He said the dispute may continue for another 18 months while the grant is calculated and pending potential appeals.
East Yorkshire-based Hudson supplies construction operatives on self-employed contracts. It also takes on payroll functions and the responsibility for dealing with compliance issues.
The bulk of the dispute between the two has focused on whether the CITB should consider the firm as “an employer in the construction industry” – and therefore whether it is eligible to pay the CITB levy.
In 2016, the then Department for Business, Innovation and Skills and CITB won a judicial review brought by Hudson Contract Services over changes to the levy system, including the introduction of a 1.25 per cent subcontractor levy.
In 2020, Hudson launched an advertising campaign encouraging SMEs to vote against three more years of the operation of the CITB levy. The body holds a vote on the continuation of the levy every three years.
During 2018, Hudson Contract Services underwent a restructure and became a wholly owned subsidiary of Hudson Contract Limited. The parent company continued the trade earlier carried out by Hudson Contract Services.
The subsidiary, renamed Knot Builders Ltd, only continues to exist in order to “defend its position on grant and levy”, according to its managing director.
