For 2017-2018 Tax Year
In this article we are going to succinctly explain what the soon to be introduced apprenticeship levy is, the companies it applies to and the impact this new system will have on all companies in the UK more broadly.
From April 2017 the manner in which apprenticeships are funded in England is set to change quite drastically. The government will be introducing an apprenticeship levy. The levy will require all employers, regardless of sector, with a pay bill of more than £3 million annually, to make an investment in apprenticeships of 0.5% of their annual pay bill.
The apprenticeship levy’s main aims are to encourage businesses to hire more apprentices and better help fund apprenticeship growth to meet the government’s plan to create three million quality apprenticeships by the year 2020.
Every eligible employer will have a levy allowance of £15,000 per year which can be used to offset against the levy they must now pay. In other words, an employer will only have to pay the levy if their pay bill exceeds 3 million pounds in a given year.
The employer will have to pay the levy to HMRC via the Pay as You Earn (PAYE) process. For the purpose of the levy, an ‘employer’ is anyone who is a secondary contributor and pays Class 1 secondary NIC’s for their employees. Further, it’s worth noting that apprenticeship levy payments made to HMRC will be allowable for corporation tax.
Companies who pay into the apprenticeship levy and offer apprenticeships will be allowed to claim back their contributions in the form digital vouchers which they can use to pay for training apprentices. The voucher system will not apply to Wales, Scotland or Northern Ireland.
If an employer decides that they want to take on more apprentices than the value that their levy contribution covers then they will be eligible to apply for top-up payments. The value of the top ups and how they will work will be outlined in detail by the government in the summer of 2016.
The vast majority of companies in the UK will not be required to pay the apprenticeship levy. It is crucial to note though that the government has not finalised how these businesses will gain access to the funding for apprentice training or whether the bigger companies that do pay the levy can give their vouchers to them.
What is known, however, is that all apprenticeship funding will be coming from the apprenticeship levy pot from April 2016 and that the government will be allocating a portion of these funds to smaller firms.
We hope this article has been useful in explaining what the upcoming apprenticeship levy is, what the criteria for participation is, as well as what its impact is likely to be more broadly across the UK. You can find out more about the apprenticeship levy and how it will effectively function by following this link.