Apprenticeship Levy – Information for Paying and Non-Paying Employers

What are the changes?

Changes to the way apprenticeships are funded come into force on 6th April 2017 in the form of a new apprenticeship levy, which will be applied to all employers with an annual wage bill greater than £3 million.

Focus 4 Learning Ltd, are committed to helping all employers (Levy and non-Levy payers) to understand the Levy and the apprenticeship reforms which are taking place. We will help all employers to make the transition to the new arrangements.

Any employers who are unsure about what they have to do, or who would like more information about existing apprenticeship schemes before the changes are introduced, should get in touch with us at the earliest opportunity.

Please call our number 01216380588

or email: contact@focus4learning.co.uk for more information.

What is the Apprenticeship Levy?

All employers with an annual wage bill greater than £3million will be expected to pay a 0.5% tax on payroll.

The Government hope the changes will help to bridge the skills gap by encouraging more businesses to invest in future talent and help it fulfil its pledge to create three million more apprenticeships in the UK by 2020.

The levy will replace all taxpayer funding for apprenticeships for companies of all sizes.

What about SMEs that do not have to pay the levy?

Employers who do not pay the apprenticeship levy will not need to use the digital voucher to pay for apprenticeship training and assessment until at least 2018.

However, they will be asked to contribute a ‘small proportion’ of funding toward the cost of their apprenticeship training.

The employer will make an initial payment to the training provider and the Government will then pay the difference.

The Government will pay up to 90% towards the cost of training and assessment, and employers will pay the remaining 10%.

Calculating what you have to pay

All firms receive an offset allowance of £15,000.

Example: an employer who would pay the levy:

An employer with an annual wage bill of £5million:

Levy sum: 0.5% x £5,000,000 = £25,000

Offset allowance of £15,000, so £25,000-£15,000 = £10,000

This employer will pay a Levy of £10,000

What can levy funds pay for?

Funds can pay for apprenticeship training and assessment.

They cannot pay for apprentices’ wages, travel or subsidiary costs, managerial costs, work placements, traineeships or the costs of setting up an apprenticeship programme.

How will the apprenticeship levy be collected?

The levy will be collected every month through the PAYE system alongside income tax and national insurance contributions.

The first time eligible employers will have to declare their liability to HMRC will be in May 2017 for levy due on their April payroll.

Levy-paying employers will be able to see corresponding funds in a dedicated digital account shortly after their final declaration to HMRC, so after May 22.

What will employers get back?

Employers in England will be able to reclaim their levy contributions as digital vouchers to pay for training apprentices. The voucher system will not apply in Scotland, Wales or Northern Ireland.

Unspent funds in an employer’s digital account will expire after 24 months.

Employers that pay the levy will also receive a 10% top-up from Government to their total monthly contributions in England.

How to access your funds

Employers can access their funds through an online account.

What happens if an apprentice starts before the changes are introduced?

Employers that start an apprentice before 1 May 2017 will receive funding under the current system – and that funding will continue for the duration of the apprenticeship.

Will there be any extra financial support?

For employers who take on an apprentice aged 16-18, the government will pay 100% of the training costs.

How will the levy work in Scotland, Wales and Northern Ireland?

Only employers in England will receive funding through their digital accounts. A sum of £0.5billion will be allocated to governments in Scotland, Wales and Northern Ireland and they will decide how the funds should be spent.