What is the apprenticeship levy?
The levy is a government tax of 0.5%. All businesses operating in the UK are required to pay the levy if they have a pay bill of more than £3 million per year. No employer is exempt including charities, colleges etc. The levy is collected monthly and held in a virtual account. The employer can earn back their levy by delivering apprenticeships.
When did the levy come into operation?
Why was the levy introduced?
The government set a target of creating 3 million apprenticeship places by 2020, so they decided they needed a sustainable, long-term funding solution to help the education and skills system better meet the needs of employers. The levy is expected to generate £2.5 billion by 2020.
How is the apprenticeship levy calculated?
It is 0.5% of your annual pay bill. This is based on gross pay and does not include NI and pension contributions and will be offset by a £15,000 allowance.
Example 1: an employer who would pay the levy
An employer with an annual pay bill of £5,000,000:
Example 2: an employer who would not have to pay the levy
An employer with an annual pay bill of £2,000,000:
Is there an allowance?
Yes, there is a levy allowance of £15,000 per year to offset the levy that must be paid. This means you will only have to pay something if your bill exceeds £3 million a year. The allowance operates on a monthly basis, leaving you £1,250 a month. This can only be spent on government approved apprenticeships.
What happens to any unused allowance?
It is carried on over to the next month. If you have multiple PAYE schemes and do not use the full £15,000 allowance, you will be able to offset the unused amount against another one of your schemes once the tax year has ended.
How do I estimate my levy contribution?
There is an online tool HERE
How is the levy be paid?
It is paid to HMRC through the PAYE process alongside tax and NICs. You have to declare if you think you will be paying the levy and include it in usual PAYE payment to HMRC by 19th (or 22nd if you report electronically) of the following month. The very first submission to declare was in May 2017. These payments will be allowable for Corporation Tax.
Will connected companies receive more allowance?
No, where companies are connected they will only receive one £15,000 levy allowance and it then must be decided what proportion of the allowance each employer of the group will be entitled to. The decision must be made at the beginning of the tax year and will then be fixed for that year, unless a mistake is made where more than £15,000 is being claimed.
If the group has separate payroll accounts (HMRC VAT numbers), then each organisation in the group will be treated as a separate payroll by HMRC.
What if I already contribute to a separate levy system or other collective training arrangement? E.g. Construction already operate a levy through CITB
The company is still required to pay the levy.
What is the (Digital) Apprenticeship Service?
Levy payers have been able to use the full service from April 2017 to:
Non levy paying employers have been able to fully use this service from 2018.
How do I access money paid under the levy?
Once you have declared whether you are paying the levy or not, you will have access to funding through the new (Digital) Apprenticeship Service account. This can be used to pay for training and assessment for apprentices and also helps you find training providers. You have been able to register your account from January 2017. PAYE schemes must be verified and linked to account. You can have more than one account to keep schemes separate.
When will the funds appear in my digital account?
After final declaration to HMRC, around 22nd of May 2017. Any apprenticeships started before 1st of May will operate under previous frameworks and standards. For every £1 that enters the digital account you will get a 10% top up to spend from the government.
Do these funds expire?
They will expire 24 months after they enter the account unless spent on training.
What can I use these funds for?
Funds in your digital account, and funding provided by the government through co-investment, can only be used towards the costs of apprenticeship training and end point assessment. This must be with an approved training provider and assessment organisation.
Is there an age limit?
The levy can be spent on apprenticeships of all levels and ages.
Will I still have to contribute anything if I don't pay the levy?
Non-levy paying employers will contribute 10% of the cost of training an apprentice. The government will co-invest by paying the remaining 90%. Businesses with fewer than 50 employees won't pay anything if they employ apprentices under 19 and will receive a £1,000 payment with an additional £1,000 to the training provider. The Government will ask you to pay this directly to the provider and you will be able to spread it over the life time of the apprenticeship, to a schedule you agree.
What are the rules for Non Levy paying employers?
If you do not pay the levy, you won't need to use the (digital) apprenticeship service to pay for apprenticeship training and assessment until at least 2018.
When the new funding system begins in April 2017, as a non-levy paying employer you can choose the training you'd like your apprentices to receive, an approved training provider and an assessment organisation using the registers available on the digital apprenticeship service. You should agree a price with the training provider.
Every apprenticeship will be allocated to a funding band; this will determine the maximum amount of contribution the Government will make. If you negotiate a price with a provider that is more than the maximum allowed by the funding band, then you must pay the difference between the band maximum and the agreed price.
What are Apprenticeship Funding bands?
From April 2017 all existing apprenticeship frameworks and new apprenticeship standards (often referred to as trailblazer standards) will be allocated to Government funding bands. These will determine the maximum amount of money that the government will contribute for the training delivery and end point assessment of each apprenticeship.
What are the new apprenticeship standards?
The new standards are defined by Trailblazer employer groups and relate to a specific role or occupation. The standard is a short document that describes the level of knowledge, skill and behaviours required to demonstrate full competence for the role. All standards are accompanied by a detailed assessment plan. They require at least 12 months of training and will include assessment criteria and relevant qualifications.
Apprenticeship completion will be through an independent endpoint Assessment rather than ongoing achievement.
What other support is available for employers?
To help meet extra costs, you will receive the same payment (£1000 approx.) as you do when you recruit a 16 to 18 year old apprentice, if you recruit:
What if I use up all my levy account?
If you are a levy paying employer and spend your entire levy and 10% Government top-ups, the Government will co-fund any additional apprenticeship funding. As the employer you will pay a percentage for additional apprenticeship training after your levy is used, and the Government will also contribute to this.