The Construction Industry Training Board v Beacon Roofing Ltd

For a statutory levy based on payments made under a labour-only agreement, the purpose of the agreement is determined by what the agreement was intended to achieve, viewed as a whole. It is not necessarily the same as the reason why one party selected that agreement or supplier. The court may consider the parties’ subjective intentions, but must assess them alongside the contractual arrangements and their practical operation. Where an intermediary engages workers and supplies their services to the business, the agreement may have the provision of those services as its main purpose even if it also provides payroll, tax and employment-status administration. The court should not give undue weight to a relatively small ancillary fee while ignoring the substantially larger payments made for the workers’ services.

The Board imposed a construction industry training levy on Beacon Roofing Ltd, including a 1.5% levy on payments made under arrangements involving Hudson Contract Services Ltd. Beacon had previously engaged its roofing operatives directly. Under the new arrangements, Hudson engaged the operatives and supplied their services to Beacon, while also assuming payroll, tax and employment-status administration.

An employment tribunal held that the main purpose of the contract between Beacon and Hudson was the provision of administrative services, with the labour element being incidental. The Board appealed to the High Court on a point of law under section 11(1) of the Tribunals and Inquiries Act 1992. The central issue was whether the contract was a labour-only agreement because its purpose was wholly or mainly the provision of the operatives’ services to Beacon.

1. Appeal allowed. The levy assessment notice was reinstated. Beacon was ordered to pay the Board’s costs, subject to any further application.
2. The tribunal erred by equating the purpose of the contract with Beacon’s reason for entering it. It should also have considered Hudson’s purpose. More fundamentally, a party’s reason for choosing a contract is not necessarily the contract’s purpose.
3. In determining the purpose of an agreement under Art 2(1)(h) of the Industrial Training Levy (Construction Industry Training Board) Order 2009, the court may take account of the parties’ subjective intentions. It must ask what the agreement was intended to achieve and how that objective was to be achieved. The agreement must be considered as a whole, without undue emphasis on individual features.
4. The arrangements relieved Beacon of administrative and clerical obligations and employment-status risk, but those objectives could be achieved only by Beacon divesting itself of its workforce and obtaining the operatives’ services from Hudson. Hudson engaged the operatives and supplied their services to Beacon. The administrative fee did not alter the main purpose of the agreement.
5. The tribunal also erred by focusing on the £15 weekly charge for ancillary services while disregarding the much larger payments made to Hudson for the operatives’ services. On the primary facts found, the only conclusion open to the tribunal was that the main purpose of the contract was the provision of the operatives’ services to Beacon.

The employment tribunal allowed Beacon’s appeal against the levy assessment. The Board appealed to the High Court under section 11(1) of the Tribunals and Inquiries Act 1992. The High Court allowed the appeal and reinstated the assessment.