THE APPRENTICESHIP LEVY
BY HER MAJESTY'S GOVERNMENT
The Apprenticeship Levy is a government initiative that was originally announced in the 2015 Summer Budget. The government proposes to apply the Levy to large employers across all industries, throughout the country. The Apprenticeship Levy is being introduced as part of the government’s plan to help fund 3 million new Apprenticeships by 2020.
As a major commitment to increasing both the quality and the quantity of Apprenticeships in England, the government is putting the control in the hands of Employers around the country.
The Levy is positioned as the government’s logical solution to funding the increase in apprenticeship numbers and putting control of funding in the hands of employers.
WHAT THE LEVY MEANS FOR EMPLOYERS
Requires a medium to long term strategic approach
(min. 3 years)
24 months to use the levy
The levy is non-optional
Can gain additional funding at 90% when own levy spent
Can allocate 10% to another employer (e.g. supply chain) after 1 year
Unused surplus available to other organisations (including competitors)
THE LEVY EXPLAINED
All UK employers who have a total employee pay bill above £3m a year will pay the levy. This includes public and private sector, charities and educational providers such as academy groups and universities. The levy rate was set at 0.5% of your pay bill in the November 2015 Comprehensive Spending Review.
Your ‘pay bill’ is your total employee earnings subject to Class 1 secondary NICs.
Employers get a £15,000 fixed annual allowance to offset against the levy payment. Employers who operate multiple payrolls will only be able to claim one allowance for the levy.
An example: if you have a £3m pay bill, you’d have a levy bill of £15,000 (at 0.5% of employer pay bill). The allowance is offset against this so your levy payment is £0.00.
WHEN DOES THE LEVY COME INTO EFFECT?
The levy will come into effect in April 2017. Employers included in the levy should have their first levy payment taken then.
HOW MUCH OF THE LEVY WILL YOU PAY?
Here are some examples of how much employers may pay for the levy;
Employer A: 1,000 employees, each with a gross salary of £20,000
Annual pay bill: 1,000 x £20,000 = £20,000,000
Levy applied: 0.5% x £20,000,000 = £100,000
After allowance applied: £100,000 - £15,000 means £85,000 levy payment
Employer B: 500 employees, each with a gross salary of £20,000
Annual pay bill: 500 x £20,000 = £10,000,000
Levy applied: 0.5% x £10,000,000 = £50,000
After allowance applied: £50,000 – £15,000 means £35,000 levy payment
Employer C: 100 employees, each with a gross salary of £20,000
Annual pay bill: 100 x £20,000 = £2,000,000
Levy applied: 0.5% x £2,000,000 = £10,000
After allowance applied: £10,000 – £15,000 means £0 levy payment
HOW WILL THE GOVERNMENT COLLECT THE PAYMENT?
Payments will be collected monthly by HM Revenue and Customs (HMRC) through Pay as You Earn (PAYE), alongside tax and National Insurance.
WHAT ARE THE PENALTIES FOR NON-PAYMENT?
There will be the same time limits, penalties and appeal procedures as for income tax.
HOW WILL I DRAW DOWN FROM THE LEVY FUND?
In England, you’ll need to register your details online, along with the details of your apprentice. You’ll be able to see how much can be drawn down for each apprentice in the form of the voucher. You can then use these vouchers to spend on training with registered training organisations from late May 2017.
Details are yet to be confirmed about access to levy funds outside England.