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PROPERTY AND CONSTRUCTION
Contents 3 Welcome to the Spring edition of our Property and Construction newsletter
8 Building with Gipping
10 Personal Accident Cover - Have you considered it?
4 Beware what lies beneath!
12 Meet the Team
6 Keeping Compliant with CIS
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Welcome to the Spring edition of our Property and Construction newsletter.
As ever, our team at Scrutton Bland are here to help you navigate the constantly changing landscape, keep you informed about new regulations and assist you with all aspects of tax, accounting and insurance which relate to this sector. S ince our last newsletter we’ve seen restrictions relating to the pandemic HDVHDVSHRSOHUHWXUQWRRIʳFHV and in-person events. However the war in the Ukraine has had serious economic consequences as fuel supplies have been impacted, resulting in higher prices, and added to the problems with labour costs and materials availability there is something of a perfect storm when it comes to resources for construction professionals.
The Construction Industry Scheme (or CIS) is now up and running. On page 6, Sam Stent, Tax Advisory Manager and Gavin Birchall, Tax Advisory Partner look at the implications of a recent court case which upheld HMRC’s decision to withdraw gross payment status under the CIS despite the taxpayer having subsequently complied fully with all its tax obligations. This will undoubtedly cause alarm bells to ring within the construction industry and it is now more important than ever for these taxpayers to ensure that the relevant TXDOLʳFDWLRQWHVWVDUHPHWDVLQJOHPLVWDNH could prove very costly. :HDUHGHOLJKWHGWRIHDWXUHDSURʳOHRQSDJH 8 of one of the region’s best known building ʳUPV *LSSLQJ&RQVWUXFWLRQ/WG*LSSLQJKDYH recently completed work on the community centre facility at the New Wolsey Theatre in the centre of Ipswich - a visually arresting project which has already won awards. Paul Orriss, Gipping’s Joint Managing Director talks about the challenges that were involved in the project, and the importance of having strong working relationships to deal with issues that can arise on projects of all sizes. Despite the physical competency and skill of most construction professionals, the risk of accidents always remains. On page 10 Insurance Executive Ryan Whybrow looks at personal accident insurance, and why it should be an important consideration for anyone in this sector, to ensure that loss of income is properly covered in the event of an accident which prevents you from working.
Ben Cussons
What can construction businesses do to address these challenges? One important strategy is to plan ahead as rigorously as possible, not least in understanding the lie of the land that they are working on. On page 4 we look at some of the issues involved in dealing with unanticipated obstacles such as water mains or geological features along a pile line, and the impact these can have. It’s vital to ensure you talk to your insurance broker to make sure that the correct covers are in place so that ‘what lies beneath’ doesn’t catch you out.
Finally we’re delighted to announce that Scrutton Bland will be one of the sponsors of the Essex Housing Awards 2022 , which will be happening in November. We’ll be sponsoring the Climate Action Award, so if you or your business has been involved in a construction industry project that has taken into account the importance of climate and environmental issues, then this may be your chance to have that work recognised by some of the leading regional names in this sector. More information about the awards will be available at the end of 0D\VRSOHDVHYLVLWKWWSV ZZZKRXVLQJHVVH[ RUJKRXVLQJH[FHOOHQFHDZDUGVWRʳQGRXW more or keep an eye on social media and the trade press for details. We hope that you enjoy this edition of the Property and Construction Newsletter, and if you want to discuss any of the points raised or DOWHUQDWLYHO\LIWKHUHDUHDQ\VSHFLʳFWRSLFV\RX would like covered in future issues, please get in WRXFKZLWK\RXUXVXDO6FUXWWRQ%ODQGFRQWDFWb
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Beware what lies beneath! Construction companies and piling contractors must do their homework with regard to a site’s ground conditions. Understanding the lie and the geology of the land, by conducting or referencing an accurate site survey, is essential not just for the project but also because an insurer requires all material facts about work undertaken.
Getting valid insurance in place, and accurate pricing for that insurance, requires the underwriter to thoroughly understand the risk – and any changes to it - through information supplied. Unfortunately, contractors and subcontractors frequently encounter unanticipated obstacles that affect the risk, intended completion date and project cost. The obstacle could be a hitherto undetected water main, well or burial site. It could be a stratum of rock along a pile line. The HS2 project has even unveiled a previously hidden Roman trading settlement.
Whilst some obstacles could lead to considerable delay, others could make the proposed work more challenging, requiring a change of working method, different equipment and potentially more labour. Insurance alarm bells should ring. Who bears the cost, may not be stated within the contractual terms agreed at the project’s outset, but the general legal position is that, if a contractor promises to build a structure for an employer, they must do so, irrespective of whether the employer produced the design.2 If not, they can be found in breach of contract and even arguments about lack of prior site access ZLOOSUREDEO\QRWVXIʳFH
$Q\VZLWFKLQPHWKRGRORJLHVFRXOGLQʴXHQFH insurance covers and the payment of any future claims, so the insurer needs to be instantly informed. New equipment may have to be used. Piling may have to be to a greater depth than policy terms allow. Contractors FRXOGʳQGWKHPVHOYHVZRUNLQJRQDVLWHZLWK groundwater issues and contaminated risings, or one with collapsed excavations, variable ground conditions or steep gradients. The risk can change.
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Trying to combat adverse conditions with the wrong equipment, could also increase the health and safety risk. No matter what the contractual pressure to proceed, a contractor should always remember their duty of care to both employees and hired-in workers. Essential covers are the legally required (PSOR\HUV/LDELOLW\LQVXUDQFHDQG3XEOLF /LDELOLW\SURWHFWLRQ,WFRXOGDOVREHZRUWK FRQVLGHULQJ([FHVV/LDELOLW\LQVXUDQFHZKLFK will step in, should a claim exceed the core liability policy’s limit.
A Contractor’s All Risks policy will cover property damage, including improper structure construction and third-party injury and damage claims. If a contractor is a specialist, such as a piling company, a more tailored policy may be required. But what of the contractual obligations? Purchasing a Performance Bond allows a contractor to guarantee their obligations to their client, offering reassurance that the project will be completed or in the event of breach of contract, direct losses or damages paid to affected third parties.
Get in touch with your broker, advise them and your insurer of everything and listen to advice relating to covers. If not, what lies beneath could catch you out. To get in touch with one of our friendly team call 0330 058 6559 or email hello@scruttonbland.co.uk
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Keeping Compliant with CIS Sam Stent, Tax Advisory Manager and Gavin Birchall, Tax Partner, look at a recent Upper Tribunal decision, HMRC v RMF Construction Services Ltd, which has reaffirmed the importance of tax compliance and good record keeping for businesses within the construction industry.
In this case, the Upper Tribunal upheld HMRC’s decision to withdraw gross payment status under the Construction Industry Scheme for a company that was registered for CIS gross payment status.
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I t was notable that HMRC sought to withdraw the CIS gross payment status of the taxpayer on the basis that the WD[SD\HUKDGʳOHGLWVFRUSRUDWLRQWD[ return after the due date and had also paid its corporation tax liability late for a subsequent accounting period. The cancellation of the taxpayer’s gross payment status was suspended until another case had been decided before the Tribunal during which period the taxpayer had subsequently complied fully with all its tax obligations. The Upper Tribunal determined that HMRC’s decision to withdraw the taxpayer’s gross payment status was not disproportionate despite the fact that the taxpayer had subsequently complied fully with its tax obligations. The Upper Tribunal ruled that HMRC’s decision to cancel a taxpayer’s gross payment status for failure to comply with tax ʳOLQJRUWD[SD\PHQWGHDGOLQHVFRXOGRQO\EH disproportionate in exceptional circumstances. The clear lesson from this case is that if a EXVLQHVVIDLOVWRʳOHDWD[UHWXUQRQWLPHRU to pay tax by the requisite deadline (however minor the compliance failure is) and HMRC serve notice to cancel a business’ gross payment status, it is unlikely that the business will be able to rectify this issue by subsequently dealing properly with its tax obligations. Instead it is likely that they will need to wait at least a year from the date of cancellation before they can apply for their gross payment status to be reinstated. This should act as a wake-up call to those businesses with gross payment status to ensure that all tax returns are submitted promptly and all tax paid by the relevant deadlines. In addition, it is equally important that the directors or shareholders of the business are also tax compliant as the terms of gross payment registration often extend the tax compliance conditions to the directors and shareholders of such businesses.
When might gross payment status be lost?
Once every 12 months, HMRC reviews gross payment status holders and has extremely wide-ranging powers to cancel gross payment status if a gross payment registered business no longer meet all the relevant tests or if they have failed to comply (whether as a contractor or as a sub-contractor) with any provision of the CIS. The annual review is known as the Tax 7UHDWPHQW4XDOLʳFDWLRQ7HVW 7747 +05& has a rolling programme under which it reviews 2% of gross payment status holders each week. HMRC do not inform sub-contractors of the review date and there are no warning mechanisms that a taxpayer may be at risk of failure (except that all traders are expected to know that taxes and returns should be paid and made on time). A sub-contractor can fail the TTQT at review for any of the following UHDVRQV
O A sub-contractor’s monthly tax return has been late four or more times.
O One of those returns was more than 28 days late.
O CIS or PAYE payments were made late four or more times.
O A CIS or PAYE payment was more than 14 days late.
O One income tax payment or corporation tax payment was more than 28 days late.
O On the date of the TTQT review, any of the IROORZLQJDUHRYHUGXH
an employer’s end-of-year return (P35);
a tax return; or
£100 or more.
5HFHQWʳJXUHVVXJJHVWWKDWDERXWRIDOO gross paid sub-contractors lose their gross payment status in the TTQT tests, about half of whom successfully appeal. This means that around 15% are downgraded to net payment status each year. Now more than ever, in order to preserve their valuable gross payment status sub-contractors need to make tax compliance a priority. Contact our construction sector tax advisory team if you would like help reviewing your CIS reporting and systems or your tax affairs more generally, or if you are considering outsourcing the preparation and submission of your CIS and PAYE tax returns at SBTaxPlus@scruttonbland.co.uk
What is gross payment status?
Businesses which are registered for gross payment status are able to receive payments for services provided to other construction industry related businesses in full without any CIS deduction being applied from the payment. Without this registration, businesses either suffer a 20% deduction from the payment made to it (if the taxpayer is registered for payment under deduction) or a 30% deduction (if the taxpayer is not registered for payment under deduction). Consequently, the withdrawal of CIS gross payment status can cause a VLJQLʳFDQWFDVKʴRZLVVXHIRUWKHEXVLQHVVDW DWLPHZKHQFDVKʴRZLVPRUHLPSRUWDQWWKDQ ever.
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Building with Gipping We spoke to Paul Orriss, Joint Managing Director at Gipping Construction Ltd, about their involvement in one of the region’s most eyecatching cultural projects, and how they are coping with one of the most challenging periods for the industry as prices for labour and material continue to spiral upwards
Gipping signboards have become a familiar site around Suffolk and Essex. Can you H[SODLQDELWDERXWWKHKLVWRU\RIWKHʳUP and how you have built the business? Gipping was originally founded in 2004 by myself, Chris McEwen and Peter Blemings and we were originally working on projects in Essex mainly. Peter retired from the business LQZLWK$QG\/DʴLQMRLQLQJWKHERDUGDW the same time. Chris took a step back in in 2016 and myself and Andy and I stepped up to become Joint Managing Directors. I had previously been the Finance Director and had been working closely with Scrutton Bland for many years. When the other two founders of the business wanted to retire, Scrutton Bland were instrumental in assisting with the shareholder transfer arrangements as well as the succession planning that needed to be done.
Can you say a bit about how some of your more recent projects came about?
The geometric golden roof of the New Wolsey Theatre has made it one of the most memorable landmarks in Ipswich. What were the challenges on the project? The NW2 Participation Building and Theatre Square is located next to the main building for the New Wolsey Theatre, which was originally built in 1979. However, as anyone familiar with Ipswich will know, this space is also the roof of the Spiral Car Park. This meant that the community building needed to be created from a lightweight timber frame to minimise the load on the structure underneath. Cranes and other heavy equipment had to be positioned adjacent to the works as they couldn’t sit on top of the car park. We worked with Phil Waind at WGP Architects who had been tasked with designing an ergonomic space which would encourage collaborative working and provide a tech hub for developing digital skills in the arts sector. The building roof is clad in distinctive gold-coloured roof sheeting with a black rubber skin around the lower parts of the structure, but the design was geometrically challenging, with an unusually angled curving roof, so we had to work hard to make sure every aspect of the roof was correct. Outside at the front of the building there is a raised podium with a canopy, the theatre’s historic water fountain has been refurbished to provide outside activity space, which will hopefully be enjoyed over the summer months. We’re delighted that the project was commended in the 2021 Ipswich Society Awards, and won the best use of arts, culture of sport in placemaking in the Planning Resource 2021 awards.
Historically we had only undertaken occasional work in Ipswich, however in 2019 we commenced work with Ipswich Borough Council (IBC) on the development at the former Tooks Bakery site to help construct sixty new houses and associated infrastructure as well as carrying out remediation work on the ground there. The project went really well. At the same time we had the opportunity to tender on the community facility at the New Wolsey Theatre, which is part of the regeneration of the town’s Westgate district. We were delighted to be successful in the bid, and to be able to work on such a prestigious and visually striking project.
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Has the work on the New Wolsey Theatre led to similar commissions?
You’ve said that costs are rising at an unprecedented rate. What can construction ʳUPVGRWRDGGUHVVWKLV" /DERXUFRVWVDUHKLJKDQGPDWHULDOVDUHRIWHQLQ short supply which again drives prices up. Then there is the issue of fuel prices, which hasn’t been helped as we now have to use white rather than red diesel, which is twice the price. We were hoping that things would start to settle down as restrictions eased after the main waves of the pandemic, but with the current global issues that hasn’t been the case. Certainly ʳ[HGSULFHFRQWUDFWVDUHWRXJKWRSULFHDWWKH moment and the industry is pushing towards SULFHʴXFWXDWLRQFODXVHVZKLFKSURWHFWERWKWKH client, supply chain and the contractor. Between February 2021 and February 2022 prices have increased by over 20% which makes giving an DFFXUDWHʳ[HGSULFHQLJKRQLPSRVVLEOH The best advice I can give is to work at creating honest relationships with clients and suppliers. Gipping’s philosophy has always been that the key to good business practice is to discuss issues with people in an honest way in order to solve any issues that arise. We’re all having to deal with increased costs across the board so it’s better to have a conversation about that as soon as possible with a client, otherwise you run the risk of having issues further down the line. We always try to be up-front with potential problems and to work collaboratively with everyone involved in the project. As a result we have developed some positive relationships with our colleagues, not least with Scrutton Bland.
Gipping’s directors have been working with Scrutton Bland for thirty years. What’s the secret to such a long business relationship? Our Directors worked with Scrutton Bland long before Gipping was founded and have developed a strong working relationship with them over the years. It’s so important to work ZLWKʳQDQFLDODGYLVHUV\RXFDQWUXVWDQGZKR understand your business and the kind of challenges that you are facing as the business and economic landscape changes. We know we can pick up the phone to Sue Gull or Ben Cussons and they will be there for us. When our former directors were thinking of retiring, Scrutton Bland assisted us with looking at employee share trusts and how to structure the right management team. They have also been really helpful in making sure we are kept up to VSHHGRQUHJXODWLRQVIRUʳQDQFLDOFRPSOLDQFH and what any changes may mean for our business. To get in touch to discuss your business and possible restructures please call 0330 058 6559 or email hello@scruttonbland.co.uk For more information on Gipping see www.gippingconstruction.co.uk or email marketing@gippingconstruction.co.uk
We really enjoyed working with the New Wolsey Theatre team, so much so that they then asked us to do some refurbishment work on the front of house and foyer in the main theatre, again with WGP Architects. We’ve had a huge number of enquiries since and have been working in the town on a wide variety of projects, from stripping out work on the old BT building in Handford Road, creating a new audiology unit for the NHS at St Helens House, two school projects in Whitton and construction of two blocks of apartments for IBC in Grimwade Street, near the Ipswich Waterfront. Ipswich Borough Council has a strong reputation for social housing and is working on increasing and improving their housing stock. Current demand for construction work is really high, which is somewhat ironic as costs for labour, fuel and materials are spiralling upwards at the moment.
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Personal Accident – sounds obvious but often overlooked
Ryan Whybrow, Insurance Executive specialising in construction insurance looks at personal accident insurance.
As anyone working in the construction sector will know, accidents do happen, and sometimes they can leave you unable to work. Personal accident insurance means that you or your loved ones can still have enough money to cover your essential expenses in case of accidental injury or even death.
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Who needs it?
Although we’d all like to think we are FRPSHWHQWWKHFKDQFHVRIDVHOILQʴLFWHG accident are greater than you may think and for the self-employed, without anyone else to blame the cost will fall to you or your family. Yet despite the risks, and the obvious consequences of having an accident, only 5%-10% of my clients purchase this insurance cover. They are leaving themselves exposed in an area where they could be protected.
As a broker we can use our expert knowledge to highlight areas of cover that you may not have FRQVLGHUHGLQFOXGLQJDGYLFHRQSROLF\OLPLWV sums insured. Whilst you can obtain quotes online, if you are not used to dealing with some of the specialist parts of the insurance industry LWFDQVRPHWLPHVEHKDUGWRʳQGWKHVSHFLʳF areas of exposure your construction work may have, and we see dozens of policies in this sector every day! A good broker will know which insurer(s) have the knowledge and expertise to be able to provide the most appropriate cover that you need. This is vital when it comes to making a claim, as the understanding that the insurer and broker have of the policy, and the risks that are insured under it, will make the process of settlement of valid claims much easier.
There are obviously some people in life that may see more value in taking out this kind of policy, particularly those who work in an industry with a more pronounced risk of accidents, such as construction. However, it’s ZRUWKQRWLQJWKDWHYHQLI\RXDUHDQRIʳFH worker whose hobbies don’t involve any dangerous activities, you may still consider this kind of insurance if you drive or cycle to work every day.
What is it?
Personal accident insurance should be a priority IRUWKHIROORZLQJNLQGVRISHRSOH
Personal accident insurance pays out if you VXIIHU
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Those involved in construction, industrial or any other profession that involves the regular use of heavy and potentially dangerous machinery or substances or working at height or depth Those that drive or cycle around for large parts of the day such as delivery drivers, bicycle couriers and food delivery workers Self-employed people who may have no other means of covering a period of lost earnings and business expenses People whose job involves the potential for violence, such as security and prison staff, bouncers, and police
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Temporary total disablement (an injury that prevents you working temporarily)
Won’t it cost more?
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Permanent total disablement (an injury that prevents you working permanently)
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You might assume that engaging the services of a broker will result in you paying more for your insurance. However, insurers may actually provide lower rates to brokers, due to the fact that business placed through a professional broker, and the value they add with expert advice and support, is often a lower risk for insurers. Also don’t forget that with cover VSHFLʳFWR\RXUUHTXLUHPHQWV\RXZLOORQO\SD\ for what you need. Finally, it is important to know that your broker will be there for you after the insurance is placed! After a policy is sold we will continue performing valuable day-to-day services, monitoring the adequacy of coverage limits and SROLF\WHUPVDVPDUNHWFRQGLWLRQVʴXFWXDWH dealing with any mid-term adjustments, future renewals and any claims should they happen. fun
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Death
Unlike most insurance policies, personal accident insurance does not indemnify you. This means it doesn’t try to put you back in the position you were in before the accident RFFXUUHG,WSD\VRXWDʳ[HGDPRXQWRIPRQH\LI you meet the policy terms whether you’re in a better position or not after the accident!
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What it covers and how to work out what you need
How does it differ from other personal insurance policies?
Personal accident insurance allows you to FKRRVHIURPDUDQJHRIEHQHʳWRSWLRQVȡD typical policy may cover £400 per week for temporary total disablement, or a £50,000 lump sum for permanent total disablement. We can tailor the levels of cover to suit your individual QHHGV6RPHSROLFLHVSD\Dʳ[HGDPRXQWRI PRQH\IRUVSHFLʳFLQMXULHVGHSHQGLQJRQWKH level of cover. For example, a policy might pay £10,000 for loss of a limb, £8,000 for loss of an eye, £100,000 for the death of a policyholder, etc. This is all money that could help you and your family after an accident, especially if you rely on your work to meet your living expenses.
Personal accident insurance is often confused with payment protection insurance (PPI), income protection insurance and critical illness cover. PPI protects your payments if you have an accident or become sick or unemployed. It covers accidents but is not the same as personal accident insurance. Income Protection insurance protects your income if you fall ill and can’t work. Personal DFFLGHQWSROLFLHVSD\DRQHRIIFDVKEHQHʳWEXW income protection policies pay a percentage of your income each month. Critical illness pays a lump-sum cash payment if you develop a critical illness like cancer, heart failure or stroke.
A theoretical example of how personal accident insurance might work
John is a company director in a construction ʳUP+HEURNHKLVDQNOHRQDZHHNHQGUXQDQG needed to be in a cast for eight weeks. As a result, he wasn’t able to attend site meetings RUIXOʳOKLVXVXDOUROHLQWKHEXVLQHVV7KH personal accident insurance in his business policy covered his lost income since the insurance pay out was £10,450 covering the cost of accidental injury. The cost to John was £100 – the excess on his policy. For more information on insurance for the construction industry please contact Ryan on 01206 147186 or email ryan.whybrow@ scruttonbland.co.uk
How a broker can help
6FUXWWRQ%ODQG,QVXUDQFH%URNHUV/WGLV committed to providing insurance solutions within all classes of insurance, including Personal Accident. Our experienced professional teams can offer impartial advice and have access to a wide range of products and insurers that online insurance providers may not offer.
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Meet the Team Our team of property and construction specialists regularly advise a wide range of corporate and owner managed businesses, from large civil engineering contractors to specialist craftspeople and have a thorough understanding of the opportunities and challenges facing the industry.
We seek to build long-term, trusted relationships with our clients. It is important to us that we understand our clients’ business and personal aims and objectives, in order that we can provide bespoke and personal advice.
Get in touch with a member of the team to see how they can help you.
Ben Cussons Business Advisory Director ben.cussons@ scruttonbland.co.uk 01379 773532
Sue Gull Audit Partner sue.gull@ scruttonbland.co.uk 01473 945854
Steven Burgess Audit Director steven.burgess@ scruttonbland.co.uk 01473 945870
Gavin Birchall Tax Advisory Partner gavin.birchall@ scruttonbland.co.uk 01206 417277 Mark Wilby Commercial Account Executive mark.wilby@ scruttonbland.co.uk 01379 773524 Ryan Whybrow Insurance Executive ryan.whybrow@ scruttonbland.co.uk 01206 417186 Jake Egner Tax Adviser jake.egner@ scruttonbland.co.uk 01206 417278
Jason Fayers Managing Partner and Tax Partner jason.fayers@ scruttonbland.co.uk 01473 945817 Mark Smith Corporate Finance Director mark.smith@ scruttonbland.co.uk 01473 945732
Tim Bell Business Protection Consultant tim.bell@ scruttonbland.co.uk 01473 945753 Sam Stent Tax Advisory Manager samantha.stent@ scruttonbland.co.uk 01206 417280
0330 058 6559 scruttonbland.co.uk
@scruttonbland
6FUXWWRQ%ODQG,QVXUDQFH%URNHUV/LPLWHGLVDXWKRULVHGDQGUHJXODWHGE\WKH)LQDQFLDO&RQGXFW$XWKRULW\ 2XU)&$UHJLVWHUHGQXPEHULV 0.7*
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