Severfield disputing £4m tax bill as improved profit sees firm raise dividend again

Severfield has said it is disputing a tax bill of more than £4m in a case which centres on whether site staff working away from home should be taxed on accommodation and subsistence.

The country’s biggest steelwork contractor said the issue, which could have industry-wide implications, meant it was booking a £4.4m non-underlying charge in it latest results to cover the cost.

In its results, Severfield said: “In common with many other construction companies, the Group pays its site-based colleagues an income tax and NIC free allowance to cover the costs of accommodation and subsistence that they incur whilst working away from home on construction sites.

“HMRC is asserting that, as a result of some procedural matters, largely associated with a change in tax legislation in 2016, certain of these payments are subject to income tax and NIC. The Group disagrees with the assessment raised and discussions are ongoing.

“Notwithstanding this, since HMRC has issued formal determinations for the amounts it considers are due, a charge of £4.4m has been recognised.” It added the figure include £400,000 in interest.

The news emerged as the firm said underlying profit was ahead of expectation allowing it to increase its dividend to shareholders by close to 10%.

Severfield, which is working on a string of high-profile jobs including a new car battery plant Wates is building in Sunderland and the new headquarters for HSBC in the City Mace is working on, said underlying pre-tax profit was up 13% to £36.5m on revenue down 6% to £463.5m in the year to 30 March.

The firm said the improved underlying result, which it said was “management’s primary measure of group profitability”, meant it was increasing its 2024 dividend 9% to 3.7p per share, the tenth successive increase.

But pre-tax profit was blunted by non-underlying items sending the number down 15% to £23m.

The firm said turnover was down because of a fall in steel prices as well as lower activity levels with the firm saying around £20m of the drop was due to the cancellation of a film studios scheme in Hertfordshire last year.

Severfield said its acquisition of Dutch steelwork contractor Voortman Steel Construction for £21m added £59.5m to turnover.

It said its UK and Europe order book at 1 June was flat at £478m but chief executive Alan Dunsmore said the figure was “providing us with good earnings visibility through 2025 and beyond”.

Its India business made £1.9m with its order book standing at a record £181m on 1 June.