My client is a building contractor and uses labour only sub contractors to the extent that they need to pay a CITB Levy each year.
To recover the cost of the Levy, a percentage deduction is made from the payment made to the subbie each month. This is apparently a normal procedure in many construction organisations. In other words the contractor is passing on the cost of the levy to the subbie.
We are about to advise oiur client on the VAT implications and have suggested that where a subbie sends an invoice to the company plus VAT, the VAT element must be paid in full and the percentage deduction retained from the net element. A suggestion has been made that the VAT should be recalculated on the actual amount paid to the subbie but i cannot see this.
Can anyone clarify the method of passing on the levy please.