The Apprenticeship Levy – What is it and what does it mean for you?
Despite a recent survey indicating that 39% of business people have either not heard of the apprenticeship levy, or are unaware of what it will mean in practice, the levy, which is due to come into effect from 6 April 2017, will affect many businesses. While it is anticipated that the levy will only be payable by around 2% of employers, significant changes to the way that apprenticeships are structured and funded are also being introduced from 1 May 2017, which will affect all employers. There is however some uncertainty as to the scope of training that may qualify for funding under the new system.
The levy – key points:
- The levy is in effect a new tax which employers will be able to use as a fund towards training of apprentices.
- The levy will come into effect from 6 April 2017, although the draft regulations are still subject to consultation and further guidance and regulations are expected to be published before next April.
- It is expected that employers with a pay bill of £2.8 million or more for the previous tax year, or those who believe their pay bill will be £3 million or more in the current year will be subject to the requirement to report levy obligations through the Pay as You Earn process.
- The levy payable by employers will be 0.5% of the employer’s pay bill each tax year, subject to an annual allowance of £15,000. In practice this means that only employers with a pay bill of £3 million or more will actually be liable to pay the levy.
Accessing levy funds:
- Employers will be able to access money they have paid under the levy through a new digital apprenticeship service account, run by the Digital Apprenticeship Service.
- The Government will top-up the funds in each employer’s account by 10%, so for every £1 paid via the apprenticeship levy, the employer will get £1.10 in their account.
- Use it or lose it: Funds will expire 24 months after they enter the digital account unless they are spent on apprenticeship training.
Changes to funding for all new apprenticeships:
- The system of funding is changing for all new apprenticeships from 1 May 2017 regardless of whether the employer is required to pay the levy.
- Apprenticeships must be either on a new apprenticeship ‘standard’, which are in the process of being set up under the Government’s Apprenticeship Trailblazer program, or an existing apprenticeship framework. There is as yet some uncertainty as to the extent to which employers may be able to set up new and less traditional forms of apprenticeships within the apprenticeship standards.
What should employers do now?
- Familiarise yourself with the proposed levy if you have not already done so (for a more detailed guide to the Apprenticeship Levy please see the attached briefing note).
- Estimate your annual levy contribution. There is an online tool available at https://estimate-my-apprenticeship-funding.sfa.bis.gov.uk/
- Start planning your apprenticeship training requirements going forwards and how you may be able to use the apprenticeship levy for this purpose.
- Register to create an account with the digital apprenticeship service from January 2017.
- Comply with reporting requirements from April 2017 onwards if applicable.
- Ensure your contracts of employment for apprentices are up to date.
For further information please see our more detailed guide to the Apprenticeship Levy or contact Matt Jenkin on 01628 470011 or firstname.lastname@example.org.