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Government releases details on apprenticeship levy - no move on April start date

Justine Greening

The Government has released more details of the apprenticeship levy, but there has been no movement on the April start date despite industry objections.

The new apprenticeship levy will be applied to employers with a wage-bill of more than £3 million. It requires them to contribute a tax of 0.5% of their wage-bill.

The Government has now said employers will have longer to spend funds in their digital account (the digital apprenticeship service account) - 24 months instead of the 18 months originally proposed.

This has been welcomed by the National Franchised Dealers Association.

But director Sue Robinson said: “It is positive that recent updates to the apprenticeship levy provide greater flexibility allowing more time for employers to spend their funds.

“Nevertheless, with only six months before April 2017, we are disappointed to see that the commencement date has not been delayed.

“The fact the levy applies to all UK employers, but the funding policy is devolved, with each UK nation managing its own apprenticeship programme and online digital service, represents a further challenge for businesses with apprenticeships across all four nations of the UK.

“The NFDA calls again on the Government to delay the introduction of the levy and ensure businesses can cope with it.”

> Key points of the apprenticeship levy

Paying the apprenticeship levy

Dealers will report and pay your levy to HMRC through the PAYE process.

Levy rate and allowance

Employers with an annual pay bill of more than £3 million will need to spend 0.5% of their total pay bill on the apprenticeship levy.

However, HMRC is introducing a ‘levy allowance’ of £15,000 per year.

This means the total amount you need to spend is 0.5% of your pay bill, minus £15,000.

Calculating what you have to pay

1) Work out what your total pay bill is.

Your pay bill is made up of the total amount of your employees’ earnings that are subject to Class 1 National Insurance contributions. Employees’ earnings include any money they make from employment, such as:

  • wages
  • bonuses
  • commissions
  • pension contributions

HMRC will not charge the levy on other payments to employees, such as benefits in kind.

2) Work out what 0.5% of your total pay bill is.

3) Subtract the £15,000 allowance.

Example

An employer with an annual pay bill of £5,000,000 will need to spend £10,000 on the levy:

levy sum: 0.5% x £5,000,000 = £25,000
subtracting levy allowance: £25,000 - £15,000 = £10,000 annual levy payment

Use the indicative online tool for employers to estimate your levy contribution, begin to plan your training requirements, and estimate your financial spending.

Paying the levy

If you’re an employer with an annual pay bill of more than £3 million, you’ll start paying the levy in May 2017.

Each month, you will have to:

  • let HMRC know whether you need to pay the apprenticeship levy
  • include the levy you need to pay in your usual PAYE payment to HMRC – you should do this by 19 (or 22 if you report electronically) of the following month

Any apprenticeship levy payment to HMRC will be allowable for Corporation Tax.

Calculating the levy for connected companies or charities

Where several employers are connected as a group, they will only be able to use one £15,000 levy allowance. The definition of connected companies and charities is based on the definition in the Employment Allowance.

If you are part of a group of connected employers, you must decide what proportion of the levy allowance each employer in the group will be entitled to.

You must make this decision at the beginning of the tax year and will be fixed for that tax year, unless a correction is necessary because the total amount of the levy allowance claimed across the group exceeds £15,000.

Each employer in the group will then calculate what they have to pay through the same processes set out above, but using only their portion of the £15,000 levy allowance.

Existing industry levy schemes

Some organisations already operate similar levy systems or other collective training arrangements. You will have to pay the apprenticeship levy even if you already contribute to another training arrangement.

Accessing money paid under the apprenticeship levy

Once you have declared the levy to HMRC, you will be able to access funding for apprenticeships through a new digital apprenticeship service account.

Through the digital apprenticeship service all employers will be able to:

  • select an apprenticeship framework or standard
  • choose the training provider or providers you want to deliver the training
  • choose the organisation that will assess your apprentices
  • post apprenticeship vacancies

If you are an employer who pays the levy, you can also use the digital apprenticeship service to:

  • set the price you’ve agreed with your training provider
  • pay for apprenticeship training and assessment
  • tell us to stop or pause payments (for example, if your apprentice stops their training, your apprentice takes a break from training or you haven’t received the service you agreed with the provider)

By 2020, all employers will be able to use the digital apprenticeship service to pay for training and assessment for apprenticeships.

Separate arrangements will be in place in Scotland, Wales and Northern Ireland.

Government statement

Justine Greening (pictured), the education secretary, said in a statement: “The levy applies to all UK employers but apprenticeship funding policy is devolved.

“It is for the devolved administrations to decide how they use their levy income. This statement sets out how we will fund apprenticeships in England to help build an economy that works for everyone.

“To do that we are not only introducing the levy but also reforming the way we fund apprenticeships, introducing a dedicated register of approved apprenticeship training providers and launching the employer-led Institute for Apprenticeships. These changes will ensure apprenticeships are high quality, meet the needs of employers and provide opportunities for millions more people.

“After extensive discussions with employers and training providers we are today publishing the final funding policy for May 2017 onwards and details of the new register of apprenticeship training providers.

“The adjustments we have made to the funding policy since our proposals in August will help ensure that the reforms benefit more employers, providers and apprentices.”

> More information on the apprenticeship levy 

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