The government is set to raise £3bn from a new employer levy that will create 3 million extra apprenticeship placements in Britain by 2020.
The Apprenticeship Levy will affect any UK employer whose annual pay bill exceeds £3million. It will come into force in April 2017.
All employers with payroll outgoings above the threshold are legally required to pay the Apprenticeship Levy, regardless of sector, workforce size, business type or existing contributions to apprenticeship or training schemes. The levy will amount to 0.5 per cent of a qualifying employer’s pay bill.
However, the government’s £15,000 allowance will cancel out levy contributions for any employer whose staffing costs fall below the £3m threshold. The allowance will need to be apportioned by group companies, as it will not apply on a per business basis.
The Apprenticeship Levy is payable to HMRC and will be collected monthly through the Pay as You Earn (PAYE) system, alongside Income Tax and NI contributions.
The £15,000 allowance is calculated at £1,250 per month, with any portion not spent on apprenticeship training being carried forward automatically.
Payment of the levy will entitle all contributing employers to access apprentices, who will train to meet new standards designed to deliver high quality core work capabilities.
Employers will receive an e-voucher, which can be spent on approved apprenticeship programmes via the Digital Apprenticeship Service (DAS). The government will pay a 10 per cent top up on the value of all e-vouchers used to pay for apprenticeship training in England, enhancing their cash value to employers engaging with approved training programme providers.
All DAS account funds, including any government co-investment, may only be used towards the costs of apprenticeship training and end-point assessment. All other outgoings must be funded from alternative sources.
Employers will not be able to redirect DAS account funds to pay for an apprentice for another employer, for example, a supply chain partner, but cross-funding may be permitted from 2018.
Any employer who has unused levy contributions and government top ups after 18 months will forfeit them to other employers seeking to set up apprenticeship schemes.
Employers whose wage bills do not trigger Apprenticeship Levy payments will be able to access the Digital Apprenticeship Service to manage their apprenticeship programmes and to source training. HM Treasury will retain financial responsibility for their apprenticing arrangements.
Employers will be offered an extra £2,000 to take on teenagers, care leavers and those with special education needs as apprentices.
There is no opt out from the Apprenticeship Levy – and the government has indicated it will use strict anti-avoidance provisions to deal with defaulters.
Full details of the levy scheme will be announced in October, following further HMRC consultation with the business community.
Robert Halfon, Apprenticeships and Skills minister, said the Apprenticeship Levy ‘will give young people the chance they deserve in life and build a highly skilled future workforce that the UK needs’.
However, there are industry concerns that employers have little time to prepare for its introduction, and are already having to deal with complicated National Minimum Wage and auto-enrolment requirements.
The Confederation of Business Industry (CBI) has stated that firms are ready to ‘play their part’ but called for a later start date for the levy. The largest private sector employer, the British Retail Consortium, echoed the CBI’s views, and proposed the commencement of the apprenticeship levy in 2018 ‘to create a truly viable system’.
However, the first Apprentice Levy payments are due to be collected on 1 May 2017.
For more information, please visit: https://www.gov.uk/government/publications/apprenticeship-levy-how-it-will-work/apprenticeship-levy-how-it-will-work
We strongly recommend that you speak to us about how the Apprenticeship Levy could affect your business, and how we can help you manage the potential implications, including impact on workforce, new financial obligations and payroll requirements.
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