14 June 2016

Everything you need to know about the Apprenticeship Levy

The Government plans to raise £3bn a year to create three million more ‘high quality’ apprenticeships by 2020. From April 2017, there will be changes to the funding for apprenticeship training for all employers.

A Digital Apprenticeship Service (DAS) is being developed by Government to act as a one-stop-shop for everything about apprenticeships, from information on training providers and frameworks to posting apprenticeship vacancies and choosing an assessment organisation. Employers will be able to register to create an account from January 2017.

The BPIF are on hand to assist members with understanding these changes and this article aims to address some questions you may have.

Do I have to pay?

If your organisation has an annual pay bill exceeding £3 million a year you will be expected to pay the levy, which will be charged at 0.5% of that annual pay bill. To offset the costs, you will receive a £15,000 annual allowance.

The DAS will support the English apprenticeship system and plans to use data already held about the home addresses of your employees to calculate what proportion you will have to spend through the English system. 

For eligible companies, the levy will be calculated based upon their total paybill subject to Class 1 secondary National Insurance Contributions (NICs). Earnings will include any remuneration or profit coming from employment, such as wages, bonuses, commissions and pension contributions that businesses pay NICs on. But the Government will not charge the levy on other payments, such as benefits-in-kind, subject to Class 1A NICs.

How does the allowance work?

Levy-paying employers will be given a monthly allowance of £1,250 (£15,000 pa). Any unused allowance will be carried over from one month to the next. Should you have unused allowance but paid the levy previously in the tax year, you can receive a credit to offset your PAYE liabilities. The credit will also reduce the amount of levy paid.

Funds will appear on a monthly basis once users confirm their payroll and levy contribution to HMRC. The Government will also provide a 10% top-up to employers’ funds for training apprentices, which will be delivered in tandem with funds entering accounts.

Funds, including any top-ups, will automatically expire 18 months after they enter an account unless they are spent on apprenticeship training.

How do I pay?

Employers will have to calculate, report and pay the levy to HMRC through the PAYE process alongside tax and NICs. If an organisation has calculated that it needs to pay towards the levy, it will need to declare this and include it in its usual PAYE payment to HMRC. Any apprenticeship levy payment to HMRC will be allowable for corporation tax.

What if I’m part of a group?

If an employer is part of a group of connected employers*, it must decide what proportion of the levy allowance each employer in the group is entitled to. This decision will need to be taken at the beginning of the tax year and fixed for that year. Following that, each employer will calculate what they have to pay, using their portion of the £15,000 allowance.

Funds can be pooled together in one digital account by registering to have multiple PAYE schemes attached to a single account.

And if I don’t have to pay?

If you do not pay the levy, you won’t need to use the DAS to pay for your apprenticeship training until at least 2018. From April 2017 you can choose the training you’d like your apprentices to receive, an approved training provider and an assessment organisation and post apprenticeship vacancies on the DAS. You should agree a price with the training provider and pay for this through co-investment with the Government (funding bands and maximum costs apply). 

What about my current apprentices?

For apprentices who begin their training before April 2017, funding for the full duration of the apprenticeship will be provided under the terms in place when the apprenticeship began.

Can Levy funds be used to train other companies’ apprentices?

For the first year of the levy, employers will only be able to use the funds for training and assessing their own apprentices, but the guidance suggests this may change.

Where can I find more information?

The Government will publish further guidance in June, October and December 2016 on the following topics:

• Funding bands

• Government support

• Extra payment for hiring 16-18 year old apprentices

• Amount paid for English and maths training

• Eligibility rules for spending apprenticeship funding

• Who can provide apprenticeship training

For further information and updates on the apprenticeship levy visit www.britishprint.com/apprenticeshiplevy 

The BPIF are the number one training provider for the printing, packaging and graphic communications industry. Visit www.britishprint.com/training for full details.

*The definition of connected companies and charities is the same as the definition used with the Employment Allowance (https://www.gov.uk/government/publications/employmentallowance-more-detailedguidance).