Apprenticeship levy

30 January 2017

A new scheme known as the Apprenticeship Levy will be introduced from 6 April of 2017. It will signify a major change by the government on how they intend for Apprenticeship schemes to function and be funded.

The Apprenticeship Levy will be a levy on UK employers to fund new apprenticeships. In England, control of apprenticeship funding will be put in the hands of employers through the Digital Apprenticeship Service.

Who is likely to be affected?

This will affect employers in all sectors. The Levy will only be paid on annual paybills in excess of £3 million, and so less than 2% of UK employers will pay it.

The Levy will be paid at a rate of 0.5% on an employer’s pay bill but since each employer will receive a £15,000 offset allowance every tax year, it is likely that a majority of companies will not need to pay anything after all.

Proposed objective

The UK government have said that they are committed to developing vocational skills and providing quality training by increasing the quantity and quality of apprenticeships. This investment will in turn increase productivity within the country’s work force.

The UK government has committed to an additional 3 million apprenticeship starts in England by 2020. The Levy will help to deliver new apprenticeships and it will support quality training by putting employers at the centre of the system. Employers who are committed to training will be able to get back more than they put in by training sufficient numbers of apprentices.

Advantages for companies who get involved

The government wants this measure to be administratively simple, and therefore employers will pay and report Levy payments through their normal payroll processes, using PAYE real time information (RTI).

The Apprenticeship Levy will also operate on the basis of known definitions which employers will already use in relation to National Insurance contributions.

You will be able to search for training providers for courses such as IT, to help deliver your Apprenticeship programme. You can register with this service from January 2017.

It is important to note that in a situation where there is a group of companies that are connected, they will only be able to use one £15,000 levy allowance. This allowance can be split across all the businesses in the group but HMRC must be notified of this decision before the start of the tax year. Also note that this decision cannot be changed for the rest of the tax year.

If you would like to discuss the apprenticeship levy in more detail, please send us an enquiry.