Businesses started paying the levy in April 2017. The levy is designed to encourage businesses to embrace apprenticeships as a way of meeting their current and future skills needs. It can be thought of as an ‘apprenticeship voucher’, where your business can receive the money back from the government to spend solely on apprenticeships.
All employers in the UK with a payroll bill greater than £3m per year pay the levy. It applies to employers in all sectors – including those already covered by statutory levy arrangements (e.g. construction and engineering construction).
The levy is charged at 0.5% of payroll. All employers receive an allowance of £15,000 to offset against payment of the levy. Only employers with payroll bills greater than £3m have to pay the levy. There is a ‘connected persons’ rule, meaning that if you operate multiple companies or payrolls, you are only able to claim one allowance and you can choose how to divide the allowance between the different connected companies.
For the purposes of the levy, payroll includes all wages, bonuses, commissions and pension contributions on which NICs are due. In technical terms, payroll means the total earnings upon which Class 1 secondary NICs are paid. It doesn’t include other payments such as benefits in kind.
Payroll of £10m per annum
Levy charge = 0.5% x £10m = £50,000
Less allowance of £15,000
Overall levy = £35,000 per annum
Payroll of £25m per annum
Levy charge = 0.5% x £25m = £125,000
Less allowance of £15,000
Overall levy = £110,000 per annum
If your annual wage bill is less than £3 million, you are considered a non-levy employer. You’ll be eligible for funding from the government towards apprenticeship training costs, helping your business benefit from apprenticeships.
The cost of the apprenticeship training will be mostly or fully funded by the UK government. Non-levy employers are eligible for 95 – 100% apprenticeship funding from the government, depending on conditions. However, you will still be responsible for paying wages to your apprentices.
Criteria for 95% government funding
Non-levy employers can receive government funding for 95% of their apprenticeship training fees if:
Criteria for 100% government funding
Non-levy employers can receive government funding for 100% of their apprenticeship training fees if:
The levy is collected monthly through Pay As You Earn (PAYE) alongside Income Tax and National Insurance.
Your £15,000 levy allowance is translated into a monthly allowance of £1,250. If your levy liability in a given month is less than £1,250, you don’t have to make a levy payment that month. Any unused allowance will be carried forward into the following month(s) until you’ve used it. If the reverse is true, and you find that you have made levy payments, but not used all of your allowance, you will be given a credit that you can offset against other PAYE liabilities.
At the end of the tax year HRMC will operate a rebate system to make sure that you pay the right amount of levy.
You can manage your levy through an account with the Digital Apprenticeship Service. Here, you will be able to:
The levy can be used to cover the direct costs associated with apprenticeship training.
Eligible spend includes:
The following spend is ineligible:
One of the great things about the levy is that you can choose who you want to work with to deliver your apprenticeship programme. You can choose from a register of approved providers created by the Government through the Digital Apprenticeship Service. All training providers found on the register have passed financial and quality tests.
You can choose to work with different suppliers for different specialisms – or let one partner handle everything for you. You’ll know that suppliers on the DAS have met certain quality checks, although you’ll probably want to check them out for yourself as well.
If you’re deeply immersed in the apprenticeship world there’s the option of becoming a training provider yourself and training your apprentices via an internal training function. These are quality and audit requirements that you’ll have to meet – but if you’re confident you’ve the right expertise in house, then it’s worth considering.
No. Once you have fully utilised your levy, along with the government top-up, you will still be able to offer further apprenticeships. Government will pay up to 90% and you’ll pay 10% of the costs for activity that exceeds your levy.
You may also want to top up your levy to deliver the programme that’s right for you in terms of the breadth of activities you want to include in your programme, over and above what’s required to fulfil the apprenticeship rules. There will be nothing to stop you doing this and paying training providers directly for this.
Businesses started paying the levy in April 2017.
You have 24 months from May 2017 to spend your levy before you ‘lose’ it and can’t get out everything that you’ve paid.
As you think about your levy, it’s worth considering the lead times involved in building a substantial apprenticeship programme, in terms of:
So you might want to get a wriggle on if you want to spend all of your 2017 levy!
If you are an employer subject to the levy, you have a number of options:
If you’re not a levy payer, it’s your choice whether to pay to train apprentices – but if you do, there are some pretty substantial government subsidies on offer. You’ll pay just 10% of the cost of training and government will pay 90% (or 100% if you have fewer than 50 employees and take on a 16-18 year old). You won’t have to use the Digital Apprenticeship Service until at least 2018 – although you might want to use it to help you find a training provider.