What Does The Apprenticeship Levy Mean For UK Businesses?
On the 6th April 2017 the UK government will roll out The Apprenticeship Levy. The aim of this new initiative is to help to fund 3 million places for apprentices by 2020, paid for by larger employers. Find out how this will affect your business.
What is the Apprenticeship Levy?
The Apprenticeship Levy is a 0.5% tax on all employers which have an ‘annual pay bill’ of over £3m (as reported via HMRC’s Real Time Information). Companies with an annual pay bill below £3m will not pay the Levy.
What does ‘Annual Pay Bill’ mean?
MRC guidance advises that ‘annual pay bill’ includes Wages, Bonuses, Commission, Some pensions contributions, arnings of employees aged 16-21 and apprentices under 25 even though employer NICs are payable at a rate of 0%
‘Annual pay bill’ does not include Earnings of employees aged under 16, Earnings of employees not subject to UK NICs legislation, Earnings disregarded for NICs purposes e.g. some pensions payments, Earnings of employees working abroad and paying only employee NICs, Benefits in kind liable to Class 1A NICs
What is the Levy Allowance?
Employers with an annual pay bill of more than £3m will receive a £15,000 Levy Allowance to offset against their Levy payment. If you are an employer with an annual pay bill less than £3m, you can still access Levy funding to support apprenticeships in your business;
| Example | |
| Annual pay bill | £5m |
| x 0.5% Apprenticeship Levy | £25,000 |
| Minus Levy Allowance | £15,000 |
| Apprenticeship Levy Sum Due | £10,000 |
The Levy allowance can be shared across connected companies subject to rules and is calculated on a cumulative basis – £1250 per calendar month, or pro-rata where shared amongst connected companies.
Will the Apprenticeship Levy affect your business?
The Levy will be applicable to all UK employers in all sectors (which have an annual pay bill of over £3million). There are no sectoral exemptions.
Note: employers in construction may find they are subject to both the Apprenticeship Levy and the CITB Levy for a period, the CITB is to work on dual liability issues in 2017/2018
The Levy will apply to a business’s own employees as well as any temporary workers on the business’s payroll, but not PSCs (Personal Service Companies) or umbrella company workers.
What Does The Apprenticeship Levy Mean For Companies Operating In England?
In England, the Levy amount will be transferred to a digital account specifically for your organisation. It will be made available for your business from 1 May 2017 to spend on apprenticeships in your company. The Levy can only be spent on accredited apprenticeship programmes.
Businesses in England which take on 16-18 year old apprentices will also benefit from a cash incentive of £1,000 per apprentice. Read more here.
What Does The Apprenticeship Levy Mean For Companies Operating In Scotland, Wales And Northern Ireland?
If your company operates in Scotland, Wales or Northern Ireland you will still have to pay the Levy, but how you reclaim the Levy for apprenticeships may vary.
– For Companies Operating In Scotland – Read more here.
– For Companies Operating In Wales – Read more here.
– For Companies Operating In Northern Ireland – Read more here.
What Does The Apprenticeship Levy Mean For SMEs?
Smaller employers won’t have to contribute to the Apprenticeship Levy fund, but can draw from it and take advantage of the online apprenticeship resources available.
In England smaller firms with fewer than 50 employees which take on a 16-18 year old apprentice will not be required to make any financial contribution towards the cost of training. Read more here.
Calculate Your Apprenticeship Levy Payment
Use the Skills Funding Agency calculator to calculate your apprenticeship levy payment.
Further Reading:
http://www.rec.uk.com/apprenticeshiplevy
http:///www.rec.uk.com REC Apprenticeship Levy Workshop London 11.1.17
http://apprenticemakers.org.uk/what-does-the-apprenticeships-levy-mean-for-smes/
