Academies - The Apprenticeship Levy

04 October 2016

Larger Academies and MAT’s in England are facing further pressure on their budgets as those with staff costs of £3 million per year and above, will be required to put aside 0.5% of their ‘pay bill’ towards the Apprenticeship Levy from April 2017. The levy is intended to help fund 3 million apprenticeships by 2020.

Collected by HMRC via PAYE, contributions will be set aside in digital accounts under the Digital Apprenticeship Service (DAS), where employers can ‘purchase’ apprenticeship training from registered providers. The service will support employers in selecting an apprenticeship framework, choosing a registered training provider, choosing an assessment organisation and advertising apprenticeship vacancies.

Employers will be able to view their funds accumulating in their account on a monthly basis and will receive a 10% top up from the government when used to purchase apprenticeship training. However, contributions will expire after 18 months unless they are spent.

The calculation

The levy is charged at 0.5% of the annual pay bill, with an allowance of £15,000 per year, which effectively excludes employers with a pay bill of less than £3million. It comprises any remuneration from employment including wages, cash bonuses, commission and pension contributions that you pay NICs on. It does not include benefits in kind.

For example, the levy for a school with a £5 million pay bill would be:
Total levy: 0.5% x £5,000,000 = £25,000
Subtract levy allowance: £25,000 - £15,000 = £10,000 annual levy payment

A MAT with staff costs of £30 million would have a levy of £135,000.

If you are required to pay the levy, you will need to declare this and include it in your usual PAYE payment to HMRC. The first submission in which you will declare that you will pay the levy will therefore be in May. The levy allowance operates on a monthly basis and accumulates throughout the year with any unused allowance carried forward.


How can Academy Schools Benefit?

Academies paying the levy will be able to purchase apprentice training that meets an approved standard or framework for existing staff or new recruits who meet the eligibility criteria. The approved standards are being developed, but roles that may be suitable for an apprenticeship in a school include:

  • Business, management & administration including HR / Finance
  • Education & training for early years practitioners and further education roles
  • Digital industries & IT skills
  • Catering staff
  • Facilities management for caretaking roles

For Academies not required to pay the Levy, the Government will contribute 90% of the cost of apprenticeship training, with a 10% contribution from the employer. There are further allowances for taking on 16-18 year old apprentices and those with additional needs.

For further information, or an informal discussion on the implications or mechanics of the Apprenticeship Levy, please contact us.

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