The apprenticeship levy?
On the 6th April 2017, the Government introduced the apprenticeship levy, with a view to creating millions of apprenticeships across the UK. The apprenticeship levy will be applied to all employers with an annual wage bill greater than £3 million however there will be a 0.5% tax on the total pay bill, which will be paid through Pay As You Earn.
The purpose of the levy is to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeships.
What size of business will be subject to the levy?
The levy threshold is calculated by size of payroll. Businesses with a wage bill of more than £3 million will be required to pay a levy. This payroll threshold only applies to 2% of employers, which means only larger SMEs fall into this bracket.
How much is the levy?
The levy amount is 0.5% of a company’s payroll, and every employer gets an allowance of £15,000 to offset against the amount they owe.
That’s why it only applies to businesses with a payroll over £3m. So to explain:
A business with a payroll of £3m:
£3,000,000 (payroll) x 0.5% (levy amount) = £15,000 (amount owing pre allowance) – £15,000 (levy allowance) = £0 (levy payable)
A business with a payroll of £6m:
£6,000,000 (payroll) x 0.5% (levy amount) = £30,000 (amount owing pre allowance) – £15,000 (levy allowance) = £15,000 (levy payable)
When will it be payable?
Businesses will be subject to the levy payment from April 2017 and it will be payable monthly.
For levy-paying employers (annual wage bill greater than £3 million)
In addition to the functions available to all employers, from May 2017 levy-paying employers will be able to access funding for apprenticeships through their digital account and:
• negotiate and pay for apprenticeship training and assessment
• manage their funding and apprentices, view their account balance and plan their spending
• stop or pause payments (for example, if their apprentice stops their training, takes a break from training or the employer hasn’t received the service agreed with the provider).
To access their funding, levy-paying employers will need to set up an account on the digital apprenticeship service from January 2017 using their Government Gateway ID, PAYE scheme details and Companies House number or equivalent, which company payroll teams should have.
For non-levy paying employers (annual wage bill less than £3 million)
By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.
Until then, non-levy paying employers will continue to negotiate and agree their apprenticeship programme with their chosen training provider.
90% of non-levy paying employers’ apprenticeship training and assessment costs in England will be paid for by the government.
The government will ask these employers to make a 10% contribution to the cost, paid directly to the provider, and the government covers the rest. This cost will be spread over the lifetime of the apprenticeship.
The government is offering additional support to organisations with fewer than 50 employees by paying 100% of training and assessment costs for their apprentices aged 16 to 18 and for those aged 19 to 24 formerly in care or with a local authority education, health and care plan.
Are all UK employers going to benefit?
Employers that do not pay the levy will still be able to access government support for apprenticeships.
Employers in England that pay the levy will be able to access the funds they have paid in via a new online portal called the Digital Apprenticeship Service (DAS). They will also receive a 10% top-up from the Government to their total monthly contributions in England.
All employers in England have access to a new, easy-to-use digital apprenticeship service to help digital apprenticeship service to help them manage their apprenticeship programme.