Posted by admin - July 6, 2016 1:04 pm Apprenticeship Levy

What is the Apprenticeship Levy?

The Government’s plans to boost apprenticeship numbers are high on its agenda, with aims to create 3 million apprenticeships by 2020.

As part of its plans to fund and encourage increased apprenticeships, the Government, in the Autumn Statement 2015, announced the introduction of the apprenticeship levy which would take effect from April 2017.

Who will it affect?

The apprenticeship levy will apply to all employers operating in the UK but only employers with a pay bill over £3 million per annum will be required to make levy payments.

The funds raised through this levy are to be used specifically for apprenticeships, making this a hypothecated or ring fenced form of taxation where the funds raised are to be spent for a particular purpose.

How it will work?

The Levy will be calculated as 0.5% of the annual pay bill which is defined as employee earnings subject to class 1 secondary national insurance contributions.

All employers are entitled to a monthly allowance of £1,250, or £15,000 per annum, in respect of the levy. Accordingly, only those employers with a payroll bill of over £3 million will pay the levy.

The allowance accumulates on a monthly basis with any unused allowance being carried forward from month to month. Similarly, if there is unused levy allowance in a month where the levy has been paid earlier in the tax year, a credit can be taken against PAYE liabilities. It makes sense, therefore, that the levy will be collected on a monthly basis alongside PAYE liabilities.

In common with the annual employment allowance there will be only one allowance available for connected employers and it should be noted that the levy is a tax deductible expense.

How is the levy used?

Once an entity has paid the levy to HMRC it will be able to access funding for apprenticeships through a new digital apprenticeships service and the element of the levy paid that will be used to support apprenticeship training in England will be added to an entities digital account.

When the funds hit the digital account a 10% top up will be added by the government meaning for every £1 of levy that is credited to the digital account an entity will be able to access £1.10 of funding for apprenticeships.

The money can only be spent on training and assessment of apprentices in England and HMRC will use its information about the home addresses of your employees to confirm this amount. Cross border employers should be aware that there will be other arrangements in place in Scotland, Wales and Northern Ireland.

The digital apprenticeships service will also assist employers in finding training providers to assist in the development and delivery of their apprenticeship programs.

So what’s the catch?

Funds will expire 18 months after they enter your digital account unless they are spent on apprenticeship training.

Next steps

All employers with a payroll of over £3 million should factor the 0.5% levy into their budgets and forecasts from April 2017.

For further information on the levy and how it will operate please click here

Alternatively, speak to your local McCabe Ford Williams office and we will be able to assist you.

We have offices conveniently located across Kent in Ashford, Cranbrook, Dover, Herne Bay, Maidstone and Sittingbourne.