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The legal forecast: 8 construction developments expected in 2017

There are a number of pieces of legislation and guidance set to affect construction in 2017. Here are eight to keep an eye on.

Following on from our 11 Things to Watch Out for In 2016 earlier this year, there are a number of important legal developments expected in 2017, which are likely to have a direct impact on the construction industry:

Apprenticeship levy

From 6 April 2017, all companies with a payroll of over £3m will pay a 0.5 per cent levy against the amount of their payroll, with an annual allowance of £15,000.

Once paid, if the company is based in England, it will be able to access funding for apprenticeships through a digital account (with different schemes applying in Scotland, Wales and Northern Ireland). By 2020 the plan is for all companies, not just those required to pay the levy, to have access to funding.

Gender pay gap reporting

The Equality Act 2010 (Gender Pay Information) Regulations 2016 are expected to come into force in early 2017. The act will require employers in England, Wales and Scotland with 250 or more employees to publish their gender pay data in respect of their employees.

In the event of any pay gaps, companies will have to provide a narrative to explain the cause and also set out any remedial action they intend to take.

The first data snapshot is expected to take place in April 2017, with the results likely to be published later in the year.

Amendment to the Construction Industry Scheme

On 6 April 2017, amendments to the CIS come into effect, applying to contractors and subcontractors providing construction operations in the UK.

Its aim is to limit the amount of under-reporting of tax. It works by withholding tax at source, paying the subcontractor with a deduction depending on their CIS status. Contractors must then make payments of the withheld tax to HMRC, either on a monthly or quarterly basis, and submit a monthly CIS tax return.

Payment reporting

Section 3 of the Small Business, Enterprise and Employment Act 2015 is expected to come into force on 6 April 2017. This will impose a duty on large companies and LLPs to publish a twice-yearly report on payment practices, including standard payment terms and time taken to pay suppliers.

The aim is to make it publicly known when companies are bad payers in order to encourage better payment practices. Failure to file or publish a report imposes criminal sanctions at director level.

Project bank accounts

From 31 October 2016, all building projects procedure by Scottish government bodies with a value of over £4m, or £10m in the case of civil engineering projects, are to incorporate PBAs.

This adds to the existing government policy in England supporting the use of PBAs and should help to increase familiarity and confidence as to their use within the industry.

Standard of design responsibility

The appeal to the Supreme Court of MT Højgaard a/s v EON Climate and Renewables UK Robin Rigg East Ltd and another [2015] EWCA Civ 407 is expected in 2017, considering the standard of design responsibility under a construction contract containing inconsistent technical and design obligation.

Use of standard form contracts

In June 2017, the Court of Appeal is due to hear the appeal of African Export-Import Bank and others v Shebah Exploration & Production and others [2016] EWHC 311 (Comm), to decide whether an industry standard form document (such as the JCT) could fall within the ‘standard terms’ category of the Unfair Contract Terms Act 1977.

If found to be the case, any limitation or exclusion clause in such a standard contract must pass the UCTA ’reasonableness’ test to be valid.

Adjudication

It will also be interesting to see the extent to which there is further court guidance on the recovery of adjudication costs under the Late Payment of Commercial Debts (Interest) Act 1998 following on from the 2016 case of Lulu Construction Limited v Mulalley and Co Limited [2016] EWHC 1852 (TCC).

Cases on so-called ‘smash and grab’ adjudications are also likely to continue in 2017 and are likely to define more clearly the consequences of parties failing to serve payment and pay less notices under the Construction Act.

Adrian Bell is a partner, Billie Bingham is a senior assoicate, and Rachel Armstrong is a lawyer at CMS

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