Apprenticeship Levy

Key points

From 05^th April 2017, employers with a paybill over £3m are charged a levy of 0.5% of their paybill;
The “paybill” is based on the total employee earnings subject to class 1 secondary NICs;
The 0.5% levy is on your full UK payroll not just the amount over £3m;
The levy is paid through the PAYE and is payable alongside income tax and National Insurance;
Payment is taken monthly, in real time, meaning if your paybill changes each month, the levy amount taken will be reflected;
Based on current funding rules, the levy can be claimed back and spent on apprenticeship training for all employees at all levels and ages, including graduates who may be eligible for level 6 or 7 apprentice programmes;
Based on current funding rules, the levy can be used to fund existing employee development as long as they meet the criteria set out;
It is estimated that 3-5% of an employer’s workforce will need to be an apprentice to utilise the levy;

Apprenticeship Levy FAQs

Q: Why has the levy been introduced?

The levy funds the government’s commitment that there will be 3 million apprentice starts by 2020. The aim is for the levy to put apprenticeship funding on a sustainable footing.

Q: Can employers opt out of paying the levy?

No – this is a mandatory tax that came into force from 05th April 2017.

Q: Is the levy per registered company or PAYE reference?

PAYE reference

Q: If the levy is taken monthly and an employer’s paybill varies, will it be taken only in those months where it exceeds £350k a month?

Yes. The Finance Bill contains a number of clauses related to the levy. These define and determine the relevant tax period, times of payments amounts payable and provisions for managing any overpayments.

Q: Does the paybill include contract and temporary staff and employment agencies?

Any person on your payroll and paid through PAYE would be included in your paybill. You will need to work with Finance Departments to find out who is in and out. If the employment agencies that supply you with staff have to pay the levy, then they may look to pass these costs onto you (much in the same way that they do with NI). So this is something you should discuss with any employment agencies that you currently work with.

Q: How do employers who pay the levy access the levy pot?

Individual employers’ funding is made available to them through a new digital account, through which employers are able to pay for training for apprentices. In England, employers will direct funding through the new Digital Apprentice Service (DAS). In England, you need to register your details online with the apprenticeship service, along with the details of your apprentice. You can see how much can be drawn down for each apprentice in your account. You can then use these funds to spend on training with registered apprenticeship training organisations. The service also supports employers to identify and pay a provider, choose an apprentice training course, find a candidate and choose a training provider.

Q: What happens if there is a surplus left at the end of the financial year?

Levy funds will expire 24 months after they enter your digital account unless you spend them on Apprenticeship training - if you don’t use them, you will lose them. This will also apply to any top-ups in your digital account. For example, funds entering your account in September 2017 will expire in September 2019. Money is spent when it leaves your digital account as a payment to a training provider. The account works on a first-in, first-out basis. Whenever a payment is taken from your digital account it will automatically use the funds that entered your account first.

Q: Can you claim your full levy bill in one year?

Yes, if you can enrol sufficient apprentices to utilise the levy.

Q: When and how will the £15,000 allowance be paid?

The levy was payable from April 2017 but the new funding system was live from 1st May 2017. Employers will have received a one off allowance of £15,000 paid into their digital account to offset against their levy payments.

Q: Are the estimates that 40% of the levy will be siphoned off to go to smaller employers accurate?

It has been assured that this is not be the case. Employers have full control over their levy pot. However, if an Employer does spend their entire levy on apprentice training within two years of the payment then the unspent portion will be made available to other employers who can then use these funds to invest in apprenticeship training.

Q: How can I spend / utilise the levy fund?

You can only use funds in your account to pay for apprenticeship training and assessment for apprentices that work at least 50% of the time in England, and only up to the funding band maximum for that apprenticeship.

Q: How much does apprentice training cost?

Funding caps are set which limit the amount of levy funds an employer can spend on training for an individual apprentice. The cap varies according to the level and type of apprentice (higher level training is likely to attract a higher cap).

Q: Does it need to be spent on recognised qualifications?

It needs to be spent on approved apprenticeships.

Q: Do employers have to use the job title “apprentice” to access the funding?

No, however, the apprentice must sign an apprenticeship contract of employment, which we recommend is professionally drafted.

Q: Will I be able to draw on apprenticeship funding for existing staff who are in a fixed-term contract of employment?

Yes so long as it is relevant to their role and it is the most appropriate way of progressing/developing his/her career, Under the current funding rules, an apprenticeship is subject to a minimum length so you must take a commitment for that person to be with you for 12 months minimum or for the full duration of the apprenticeship.

Key Points of The Apprenticeship Levy - Quest HR

Key points